T. Rowe Price Summit Municipal Intermediate Fund (PRSMX)
Ticker Symbol:
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager
  • Charles B. Hill
  • Managed Fund Since: 01/01/1994
  • Joined Firm On 12/02/1991*
  • B.S., Guilford College

*Firm refers to T. Rowe Price Associates and Affiliates
Quarterly Commentaries
as of 03/31/2014

Municipal bonds enjoyed a strong quarter amid declining yields, increased demand, reduced issuance, and a successful early-March sale of bonds issued by Puerto Rico, which was downgraded to below investment grade by the major credit rating agencies in February. High yield tax-free bonds were especially robust and outperformed the investment-grade universe, as investors continued to favor securities with a yield advantage. Longer-term Treasury yields declined from the two-year highs reached at the end of 2013, as weakness in certain emerging markets and geopolitical tensions over Ukraine prompted some risk aversion.

The Summit Municipal Intermediate Fund returned 2.61% in the quarter compared with 2.26% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and 2.19% for the Lipper Intermediate Municipal Debt Funds Average. For the 12 months ended March 31, 2014, the fund returned 0.72% versus 0.83% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and −0.38% for the Lipper Intermediate Municipal Debt Funds Average. The fund's average annual total returns were 0.72%, 5.01%, and 4.01% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.50% as of its fiscal year ended October 31, 2013.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.

Benchmark Definitions

Our slightly long stance on duration (a measure of interest rate volatility) and a modest underweight in shorter maturities helped performance during the quarter. We were overweight in 10- and 15-year bonds, which contributed positively as longer-term yields declined and prices rose. In addition, our positions in health care, transportation, and industrial revenue credits all enhanced results. On a negative note, our cash position weighed on returns. The fund experienced heavy cash inflows during the period, resulting in a higher cash balance than usual. We have been putting the new money to work methodically as investment opportunities become available.

Despite recent headlines about problems in Detroit and Puerto Rico, municipal bonds remain sound overall, with low default rates. We expect interest rates to rise due to Fed tapering and eventual monetary tightening, but rates should stabilize at higher levels. We believe the U.S. economy will continue to improve and inflation will remain subdued. Declining tax-free bond supply has been providing a tailwind for our market, and we expect this condition to continue for the remainder of the year. With elevated interest rates likely to come, the new marginal tax rate for affluent municipal investors will rise, making tax-equivalent yields increasingly compelling as the year progresses.

See Glossary for additional details on all data elements.