Money market yields remained very low in the first quarter of 2013 as the Federal Reserve kept its fed funds target rate in the 0.00% to 0.25% range to support the economy. The Fed plans to keep short-term rates very low at least as long as the U.S. jobless rate remains above 6.5% and the inflation outlook stays below 2.5% in the next 12 to 24 months. To help suppress longer-term interest rates, the central bank is purchasing $85 billion of Treasury and mortgage-backed securities each month. The Fed has said it will continue such purchases until the job market outlook substantially improves. The U.S. economy was resilient in the first quarter, strengthening after a late 2012 slowdown tied to fiscal policy uncertainty. Despite some tax increases starting in January and automatic budget cuts that took effect in March, the economy seems to have expanded at a moderate rate during the quarter.
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, 2013, 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%, 0.19%, and 1.36% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.44% as of its fiscal year ended May 31, 2012. The fund's seven-day simple annualized yield as of March 31, 2013, was 0.01%. Its seven-day simple annualized yield without waiver was −0.30%.* 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.
Benchmark Definitions
Our interest rate forecast is little changed. We expect the Fed to maintain its zero-rate policy into 2015. Even then, the extraordinary amounts of surplus liquidity Fed policy has created will take some time to unwind. Thus, we remain quite comfortable with a strategy that positions the fund near the long end of its permissible range, with a weighted average maturity of around 55 days. Liquidity and principal stability remain fundamental needs for shareholders. We are focused on managing the fund with those needs in mind.
We expect yields to remain stable over the next few months barring a flare-up in the European crisis or another event that would disrupt supply. Given this outlook and the Fed's accommodative stance, we continue to operate at the long end of our targeted weighted average maturity range. Short-term issuance will continue to be constrained with interest rates at or near record lows as issuers prefer to lock in favorable rates on longer-dated maturities. This reduction in supply will add to pressure on short-term rates. As always, our primary goal is principal preservation.
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