Yields on shorter-term Treasury bills stayed very low as the Federal Reserve kept the federal funds rate near 0%. Investor unease about China's slowing economy and the timing of the Fed's first interest rate hike since 2006 spurred demand for safe-haven assets during the third quarter. Though the Fed refrained from raising its benchmark rate at its September policy meeting, its cautious comments about global economic developments weighed on investor sentiment.
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 September 30, 2015, the fund returned 0.01% versus 0.00% for the Lipper U.S. Treasury Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.01%, and 1.08% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.44% as of its fiscal year ended May 31, 2015. The fund's seven-day simple annualized yield as of September 30, 2015, was 0.01%. Its seven-day simple annualized yield without waiver was −0.33%.* 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.
Strong demand, shrinking supply, and reductions in investment alternatives continued to restrain money market rates. Municipal issuers have restructured much of their borrowing to lock in favorable long-term rates and lower their exposure to short-term rate increases, which has limited the supply of short-term munis available in the market. In addition, the improving U.S. economy has lifted revenue for municipalities across the U.S., lessening their short-term borrowing needs. These factors have reduced the supply of high-quality, short-dated investments. Treasury-collateralized repurchase agreements (repos) remain a significant allocation in the fund.
T. Rowe Price Chief U.S. Economist Alan Levenson believes that the Fed could raise the fed funds rate as soon as December. However, we don't expect a severe Treasury sell-off to occur once the Fed starts increasing rates. While we expect the strengthening U.S. economy to put upward pressure on rates, muted inflation and the strong dollar will likely continue to sustain strong demand for Treasuries and help restrain U.S. yields. Large-scale quantitative easing efforts in Europe and Japan could also hold longer-term yields down globally by limiting the supply of high-quality government bonds. Finally, we expect that the pace of U.S. rate hikes will be gradual and the terminal rate fairly low compared with previous tightening cycles, giving investors time to adjust to the new environment.