Money market rates remained very low as the Federal Reserve kept the fed funds rate near 0% to boost the U.S. economy. The economy continued to expand in the first quarter, but the pace of growth was hindered by a severe winter that curtailed weekly hours worked and consumer spending. Still, steady job growth helped reduce the national unemployment rate to 6.7% in March. In mid-March, the Fed announced that it would buy $55 billion in Treasuries and agency mortgage-backed securities each month going forward, down from the $85 billion the central bank had bought every month in 2013. At the current pace, the Fed is expected to wind down its monthly asset purchase program by the end of 2014.
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, 2014, 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 1.30% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.44% as of its fiscal year ended May 31, 2013. The fund's seven-day simple annualized yield as of March 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.
As the Fed's unprecedented accommodative monetary policy enters its sixth year, its zero interest rate policy continues to hurt money fund returns the most. Though the Fed has started winding down its monthly asset purchase program, money market rates remain immune to the policy change, which affects longer-term interest rates. Repurchase agreements, which represent a very high-quality and liquid short-term investment, continue to play an important role in the portfolio. We continue to keep the portfolio's weighted average maturity at the long end of our permissible range, as we expect the current low rate environment will prevail well into 2015. Our focus remains on managing a high-quality, diversified portfolio focused on liquidity and stability of principal.
Signs of underlying strength in the U.S. economy have begun to reemerge as weather-related factors dissipate. Concerns about China's slowdown and the Ukraine crisis have kept downward pressure on Treasury yields. With fewer fiscal headwinds, however, we expect that the economic outlook will improve and interest rates will gradually rise. The Fed appears committed to ending quantitative easing this year, which largely seems priced into the long end of the curve. We therefore expect economic data, and occasional risk aversion, to influence the direction of longer-term rates. Upward pressure on shorter-term yields may continue as the market prices in a fed funds rate hike, which we think will occur around mid-2015.