Low rates continued to suppress income for money market investors in the first quarter of 2015. However, for the first time in over six years, the prospect of higher short-term rates looms on our investment horizon. The Federal Reserve, which has kept short-term interest rates near 0% since the 2008 financial crisis, is expected to start tightening monetary policy sometime in 2015, and many observers believe the economy is strong enough for the central bank to lift rates this summer. U.S. economic growth slowed sharply in the first quarter partly due to severe winter weather. Monthly jobs growth has remained favorable, interest rates are still very low, and last year's plunge in oil prices is keeping inflation contained and should support increased consumption.
The U.S. Treasury Money Fund returned 0.00% in the quarter compared with 0.00% for the Lipper U.S. Treasury Money Market Funds Average. For the 12 months ended March 31, 2015, the fund returned 0.01% versus 0.01% for the Lipper U.S. Treasury Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.01%, and 1.20% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.44% as of its fiscal year ended May 31, 2014. The fund's seven-day simple annualized yield as of March 31, 2015, was 0.01%. Its seven-day simple annualized yield without waiver was −0.50%.* The fund's yield more closely reflects its current earnings than the total return.
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. Return and yield will vary.
An investment in money market funds is not insured or guaranteed by the FDIC
or any other government agency. Although the fund seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
*In an effort to maintain a zero or positive net yield for the fund, T. Rowe Price has voluntarily waived all or a portion of the management fee it is entitled to receive from the fund. A fee waiver has the effect of increasing the fund's net yield. The 7-day yield without waiver represents what the yield would have been if we were not waiving our management fee. This voluntary waiver is in addition to any contractual expense ratio limitation in effect for the fund and may be amended or terminated at any time without prior notice. Please see the prospectus for more details.
Money market rates remain closely tied to the fed funds target range of 0.00% to 0.25%. Money market yields continued to trade within a very narrow range due to the Fed's zero interest rate monetary policy, low Treasury bill supply, and ongoing strong demand for high-quality and liquid assets. Repurchase agreements (repos), which provide another way to obtain high liquidity and quality, play an important role in how we manage the portfolio, though the repo market will be subject to decreasing supply. We continue to keep the portfolio's weighted average maturity near the long end of our permissible range of 60 days.
The Federal Reserve has prepared markets for an initial interest rate increase, which appears likely to occur sometime later in 2015. However, T. Rowe Price Chief U.S. Economist Alan Levenson notes that the Fed's latest projections for economic growth and inflation were lower than the central bank's forecasts in December, likely justifying a slower trajectory of rate increases. Until the onset of rate increases by the Fed, money fund investors should expect near-zero returns. In the meantime, our focus remains on principal stability, quality, and liquidity.