While these factors aided bond market performance, the benefits were largely confined to longer-term Treasuries. Yields on 10- and 30-year issues declined by 31 (0.31%) and 41 basis points (0.41%), respectively, but five-year Treasury yields fell just two basis points (0.02%) and two-year Treasury yields rose four basis points (0.04%). The primary cause of the flattening yield curve was that even as longer-term bonds rallied, shorter-term issues came under pressure when U.S. Federal Reserve Chair Janet Yellen suggested that the first interest rate hikes may occur sooner than the market was expecting.
The Barclays U.S. Treasury Index returned 1.34% during the quarter. As designed, the Portfolio performed in line with the Index with a total quarterly return of 1.26%. We continue to invest with the goal of providing returns that closely approximate those of the Index.
If you are an income-oriented investor who is looking to diversify your investments by gaining broad exposure to the U.S. Treasury market then this Fund may be right for you. It offers a diversified portfolio of Treasury securities approximating the Barclays U.S. Treasury Index.
- Passively managed in an effort to replicate the performance and composition of the Barclays U.S. Treasury Index.
- Invest substantially all (and at least 80%) of its assets in a representative sample of the U.S. Treasury obligations included in the Index.
- Provide investors with a way to gain broad exposure to U.S. Treasury market.