The U.S. economy grew at 1.8% in the first half of the year, and the effects of federal sequestration continued to weigh on growth in the third quarter. However, we expect the pace of recovery to quicken to 2.5% in the fourth quarter. To support the economy, the Federal Open Market Committee (FOMC) kept its fed funds target rate in the 0.00% to 0.25% range. The Fed elected not to reduce the pace of asset purchases at the September 17-18 meeting. However, we expect the first tapering by year-end and modest rate hikes at some point in mid-2015. The policy-setting FOMC sees the target fed funds rate at 1% at the end of 2015 and expects it to be at 2% a year later. This gradual removal of accommodation should allow money fund yields to rise, a welcome development for shareholders.
The Maryland Tax-Free Money Fund returned 0.00% in the quarter compared with 0.00% for the Lipper Other States Tax-Exempt Money Market Funds Average. For the 12 months ended September 30, 2013, the fund returned 0.01% versus 0.01% for the Lipper Other States Tax-Exempt Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.12%, and 1.07% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.59% as of its fiscal year ended February 28, 2013. The fund's seven-day simple annualized yield as of September 30, 2013, was 0.01%. Its seven-day simple annualized yield without waiver was −0.46%.* 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 this point, we are comfortable with maintaining a target weighted average maturity at the long end of our permissible range. New short-term issuance continues to be constrained as many issuers prefer to refinance with longer-dated paper to lock in the current low rates. As always, our investment selection focuses on securities with the highest credit quality. Thus, we maintain an overweight to sectors including rated general obligations, housing, hospitals, and higher education. The fund also has added to prerefunded bonds, which are longer-maturity bond issues that have been refinanced and whose is repayment secured by escrowed Treasury bonds.
Maintaining a high credit quality profile with respect to municipal issuers and the banks that provide liquidity support is a key focus in the management of the Maryland Tax-Free Money Fund. While the long-term muni market will likely continue to react to the prospects for Fed tapering, the municipal money markets should remain anchored by the fed funds target rate. Therefore, yields will likely stay range-bound for the foreseeable future. As always, we remain committed to managing a high-quality diversified portfolio with our primary focus on liquidity and stability of principal.