While short-term rates rose modestly, interest rates finished the quarter significantly lower farther out along the U.S. Treasury curve. To illustrate, the two-year Treasury yield went from 0.38% to 0.44%, the five-year from 1.75% to 1.73%, the 10-year from 3.04% to 2.73% and the 30-year from 3.96% to 3.56%. Overall, on a duration-adjusted basis, the Barclays U.S. Aggregate Bond Index return of 1.84% outperformed U.S. Treasury securities for the quarter. Investment-grade corporate bonds were the best-performing sector, followed by commercial mortgage-backed securities.
The Funds return of 1.84% matched the return of the Index for the quarter. We will continue to invest in a sample of securities that are representative of the Index in an effort to provide returns that closely approximate those of the Index.
If you are a long-term, income-oriented investor who is looking to diversify your investments by gaining broad exposure to the U.S. bond market, then this Fund may be right for you. It offers a diversified portfolio of bond securities approximating the Lehman Brothers U.S. Aggregate Index.
- Passively managed in an effort to replicate the performance and composition of the Barclays U.S. Aggregate Bond Index.
- Gain broad exposure to the U.S. Treasury, government agency, investment-grade corporate bond, mortgage- and asset-backed sectors of the fixed income markets.
- Provide investors with a way to gain broad exposure to U.S. bond market.