Tax-free municipal bonds produced solid gains in the second quarter. Longer-term Treasury yields extended their first-quarter decline amid concerns about a sharp weather-related first-quarter U.S. economic contraction, lingering geopolitical tensions with Russia over Ukraine, and a sharp increase in sectarian violence in Iraq. Intermediate- and long-term municipal rates declined more than comparable Treasury yields, but short-term yields in both markets were little changed. Longer-term and lower-quality municipals outperformed shorter-term and higher-quality issues.
The Summit Municipal Intermediate Fund returned 1.95% in the quarter compared with 1.93% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and 2.06% for the Lipper Intermediate Municipal Debt Funds Average. For the 12 months ended June 30, 2014, the fund returned 5.69% versus 5.19% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and 4.83% for the Lipper Intermediate Municipal Debt Funds Average. The fund's average annual total returns were 5.69%, 4.97%, and 4.41% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.50% as of its fiscal year ended October 31, 2013.
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Our strategy of overweighting sectors of the market offering incremental yield above high-quality general obligation and prerefunded bonds enhanced returns. Even though new issue supply was relatively low, selling pressure from other municipal investors created buying opportunities in several sectors, including transportation and health care. As a result, we were able to initiate positions in, or add to, many revenue sectors and several new health care issuers. By the end of the period, yield spreads on revenue bonds were substantially tighter than at the beginning of the period as the bonds rallied. Given the outlook for ongoing low supply and generally improving credit quality, we believe spreads could remain tight for quite some time.
We remain concerned about the potential for rising rates, but we believe that further rate increases will be at a more measured pace than what we witnessed in 2013, in part because the economy's weakness in the first quarter of 2014 is tempering full-year growth expectations. We also believe that short- and intermediate-term rates could be more volatile than long-term rates as we approach the first Fed rate hike. When making investment decisions, we consider the forward-looking projections of rates and yield curves by our interest rate strategy and economics teams, and we will continue to be careful with any portfolio changes that might materially increase our portfolio's interest rate sensitivity.