Yields on short-term Treasuries remained very low as the Federal Reserve kept the fed funds rate near 0% to bolster the economy. The recovery gained momentum in the second half of 2013 despite renewed political uncertainty over the budget and debt ceiling. U.S. gross domestic product expanded at an annualized 4.1% rate in the third quarter, its strongest pace in two years. The jobless rate declined to 7.0% in November, a five-year low, and the housing market continued its solid recovery. In December, the Federal Reserve said it would start winding down its monthly $85 billion asset purchase program starting in January 2014 but keep short-term rates very low for much longer.
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, 2013, 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%, 0.02%, and 1.32% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2013. 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 December 31, 2013, was 0.01%. Its seven-day simple annualized yield without waiver was −0.37%.* 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.
Continued demand for the safety and liquidity of Treasuries, along with Fed monetary policy, continued to suppress Treasury rates. In recent months, the rate of decline in T-bill supply has slowed somewhat and rates have stabilized. Repurchase agreements, which represent a very high quality and liquid short-term investment, continue to play an important role in the portfolio. We are keeping the portfolio's weighted average maturity longer than the competitive average, as we expect the current low rate environment will prevail well into 2015. Our focus remains on principal stability and liquidity given the low rate environment.
Our economists anticipate the Fed will end its asset purchases in late 2014 and start increasing the fed funds rate in mid-2015. Our projections are based on the central bank's timetable and assume the economic recovery stays on track. Credit markets seem to have grown accustomed to the prospect of higher yields, and we do not anticipate the same degree of rate volatility that occurred in the spring of 2013. We anticipate rates in shorter maturities will remain relatively unchanged in the near term while yields on intermediate- to longer-dated maturities will remain biased to the upside as the economy strengthens, particularly if the fiscal headwinds that restrained growth in 2013 abate and economic data stay firm.