Yields on money market instruments stayed very low as the Federal Reserve kept the federal funds rate target near 0%, suppressing income for money market investors over the quarter. Signs of growing strength in the U.S. economy raised expectations that the Fed could lift the federal funds rate target sometime this year for the first time since 2006. The municipal money market, however, has been slow to reflect the likelihood of higher interest rates. Although the Fed refrained from raising its benchmark rate target at its September policy meeting, its cautious comments about global economic developments weighed on investor sentiment.
The Summit Municipal Money Market Fund returned 0.00% in the quarter compared with 0.00% for the Lipper Tax-Exempt Money Market Funds Average. For the 12 months ended September 30, 2015, the fund returned 0.02% versus 0.02% for the Lipper Tax-Exempt Money Market Funds Average. The fund's average annual total returns were 0.02%, 0.01%, and 0.91% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.45% as of its fiscal year ended October 31, 2014. The fund's seven-day simple annualized yield as of September 30, 2015, 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.
Strong demand, shrinking supply, and fewer investment alternatives continued to constrain money market rates. Municipal issuers have restructured much of their borrowing to lock in favorable long-term rates and lower their exposure to short-term rate increases, which has curbed the supply of short-term munis available in the market. Additionally, the stronger economy has lifted revenue for municipalities across the U.S., lessening their short-term borrowing needs. These factors have reduced the supply of high-quality, short-dated investments. Credit quality has improved for many municipalities as revenues have picked up. We favor highly rated segments such as housing, education, and dedicated revenue bonds.
Supply and demand imbalances, partly due to years of historically low rates, continue to dominate the tax-exempt market. While the Fed has started removing its monetary accommodation, we expect the path toward interest rate normalization to be long and slow. T. Rowe Price Chief U.S. Economist Alan Levenson thinks that the Fed could raise the fed funds rate target as soon as December. Money fund investors should expect near-zero returns until the onset of rate increases. As always, we remain committed to managing a high-quality, diversified portfolio focused on liquidity and stability of principal.