Money market yields remained very low in the first quarter of 2013, as the Federal Reserve kept its fed funds target rate in the 0.00% to 0.25% range to support the economy. The Fed plans to keep short-term rates very low at least as long as the national unemployment rate remains above 6.5% and inflation is projected to be no more than 2.5% in the next 12 to 24 months. To help suppress interest rates, the central bank is purchasing $40 billion of agency mortgage-backed securities and $45 billion in Treasuries every month. The Fed has asserted that it will continue such purchases until the labor market outlook improves substantially. But with the economy recovering, we believe the Fed will begin scaling back its purchases in the second half of 2013.
The Summit Cash Reserves Fund returned 0.00% in the quarter compared with 0.00% for the Lipper Money Market Funds Average. For the 12 months ended March 31, 2013, the fund returned 0.01% versus 0.02% for the Lipper Money Market Funds Average. The fund's average annual total returns were 0.01%, 0.42%, and 1.69% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.45% as of its fiscal year ended October 31, 2012. The fund's seven-day simple annualized yield as of March 31, 2013, was 0.01%. Its seven-day simple annualized yield without waiver was −0.24%.* 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.
With very little change to our interest rate forecast, we are maintaining a strategy of keeping the portfolio's weighted average maturity longer than that of our average money market competitor. We expect this low rate environment to continue well into 2014, and we expect that it will take an extended period for the extraordinary level of Fed easing to be unwound. We remain wary of the credit environment, however. The financial crisis is not yet fully behind us, and uncertainty persists. Therefore, we are continuing to target only the highest-quality investments. Relative value decisions remain paramount as we weigh the risk/return trade-off of our various investment options. While selecting securities, we have shown a preference for nonfinancial companies that are raising money for working capital or other credit-positive needs. Much of the portfolio is invested in commercial paper, medium-term notes, municipal obligations, and Treasury securities.
Money market yields are likely to remain stable for the foreseeable future, barring a flare-up in the European debt crisis or some other supply dislocation. Given this outlook, and with the Fed on hold for the time being, we continue to target a weighted average maturity at the long end of our permissible range. As always, we are committed to managing a high-quality diversified portfolio, with a focus on liquidity and stability of principal.