Although inflation has been very low and is likely to remain low in the near term due to declining prices of oil and other commodities, Fed officials decided to raise short-term rates in December because of labor market improvement and their confidence that inflation will return to 2% over the medium term. In the Treasury bill market, shorter-maturity bills saw their rates slip to 0% as bill supply dropped when Congress's debt ceiling debate imposed a limit on the amount of outstanding debt from the U.S. Treasury. Once that issue was resolved, three-month bill yields gradually moved higher, ending the year at 0.16%. The yields on the one-year Treasury bill rose to 0.65% at the end of 2015.
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, 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 1.00% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 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 December 31, 2015, was 0.01%. Its seven-day simple annualized yield without waiver was −0.15%.* 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.
At the late-October Fed meeting, the market received some hints alluding to mid-December as the timing of the first rate hike. Therefore, we kept the fund's weighted average maturity similar to that of the average competitor to give the fund the ability to benefit from the higher rates that have been forecast. The fund is focused on principal stability and liquidity, so we remain diligent in monitoring the price pressures that higher rates may eventually bring.
Now that the first Fed rate hike is out of the way, Fed officials are likely to take some time assessing its impact on financial markets and economic conditions. Subsequent increases are likely to occur gradually, so the Fed may wait a few months before acting again. Nevertheless, a rising federal funds rate should eventually translate into higher income for money market investors who have endured near-zero interest rates for the last seven years.