The Treasury yield curve flattened in the final quarter of 2014. Short-term Treasury yields rose in anticipation of the start of the Fed's monetary tightening, which is expected to occur in mid-2015, but the yield on the benchmark 10-year Treasury note declined significantly. The U.S. economy grew at a revised 5% annualized pace in the third quarter, its fastest growth since the summer of 2003. After its December policy meeting, the Federal Reserve said that it would remain "patient" before raising short-term interest rates, relieving those who feared that a stronger economy would lead the central bank to raise rates sooner than expected.
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 December 31, 2014, 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 1.24% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. 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 December 31, 2014, was 0.01%. Its seven-day simple annualized yield without waiver was −0.36%.* 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 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, continue to play an important role in how we manage the portfolio, though the repo market will continue to be subject to decreasing supply. We continue to keep the portfolio's weighted average maturity near the long end of the permissible range of 60 days.
The U.S. economy continues to gain traction despite signs of slowing growth in Europe, Japan, and China. The Fed ended its longstanding monthly asset purchase program in October, but it is too early to conclude that the U.S. economy is strong enough for the central bank to start raising short-term rates. While the Federal Reserve is expected to start increasing short-term interest rates in the not-so-distant future, we believe any shift in monetary policy will occur sometime in mid-2015, at the earliest. 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.