U.S. economic data released during the quarter were decidedly mixed. Some signs of inflation began to appear, which alleviated deflation worries, and the unemployment rate declined. However, first-quarter gross domestic product (GDP) shrank at a 2.9% annualized rate, the weakest quarterly GDP reading in five years, which was attributed to severe winter weather. The Federal Reserve continued to wind down its monthly asset purchase program. Money market rates remained very low as the Fed kept the fed funds rate near 0% to boost the economy.
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, 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 1.29% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 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 June 30, 2014, 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.
The Fed's tapering of its monthly asset purchases dominated fixed income markets, but the very short-term securities in which the fund invests felt no impact from the policy change. Low rates prevailed over the period. Overwhelming demand for high-quality, liquid investments has led to minimal differences in yields between the shortest-term securities and those with slightly longer maturities in recent years. Repurchase agreements, which provide another way to obtain high liquidity and quality, continue to play an important role in how we manage the fund.
Short-term rates are unlikely to rise significantly until the Fed signals that a short-term benchmark rate rise is imminent. T. Rowe Price Chief Economist Alan Levenson thinks that the Fed will base its decision about when to hike rates on labor market improvement and wage pressures and not necessarily the pace of GDP growth. The Fed's own forecasts suggest that short-term interest rates will move higher in mid-2015. With that time frame just starting to enter into the fund's investment horizon, we are aware that some money market rates may move higher in anticipation of a rate hike. For now, we are keeping the fund's weighted average maturity longer than that of the competitor average, a strategy that has been successful in recent periods. If the likelihood of rate hikes begins to increase, we may focus more on the shortest-term securities in order to reinvest in higher-yielding securities as soon as they become available. In the meantime, our focus remains on principal stability, quality, and liquidity.