Yields on shorter-term Treasury bills stayed very low as the Federal Reserve kept the federal funds rate near 0%, though the Treasury bill yield curve steepened slightly as the Fed drew nearer to raising short-term interest rates. U.S. gross domestic product contracted slightly in the first quarter, but a stronger-than-expected May jobs report and other gauges indicated that the economy was rebounding from the first quarter's weakness, adding to uncertainty about the timing of the Fed's first rate hike since 2006. The Fed did not raise rates at its June policy meeting, but many analysts believe that the central bank will start to tighten monetary policy before year-end.
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 June 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 1.15% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. 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 June 30, 2015, 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.
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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, limited supply, and reductions in investment alternatives such as Treasury-collateralized repurchase agreements (repos) continued to restrain money market rates. Roughly one-third of the portfolio is invested in overnight and seven-day Treasury-collateralized repos, though regulatory changes have reduced the supply of this high-quality, liquid asset. We maintained a position in two-year, Treasury floating rate notes, which trade at a spread to the three-month bill. We continued to keep the portfolio's weighted average maturity toward the long end of the permissible range of 60 days, as we expect that the path toward interest rate normalization will be long and uncertain.
T. Rowe Price Chief U.S. Economist Alan Levenson expects the Fed's first rate increase by the end of 2015 and that the pace of subsequent rate hikes will be much more moderate than in past tightening cycles. Rates at the short end of the Treasury bill yield curve will likely stay near zero until the market is convinced a Fed rate hike is imminent, while longer-term securities may become increasingly volatile as Fed liftoff nears. 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.