The Federal Reserve kept its fed funds target rate in the 0.00% to 0.25% range. The central bank intends 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 suppress long-term rates and support the recovery, the Fed has been buying $45 billion in Treasuries and $40 billion in agency mortgage-backed securities every month. In mid-September, the central bank surprised many investors who were expecting the Fed to taper its asset purchases by announcing that it would continue the current pace of buying while awaiting more evidence that the recovery would be sustained. If the labor market continues to improve, the deadlock over the federal budget is resolved, and an extension of the government's borrowing ability is passed, the Fed could begin scaling back its asset purchases in late 2013 or early 2014. However, a protracted government shutdown could reduce fourth-quarter growth materially.
The Summit Cash Reserves Fund returned 0.00% in the quarter compared with 0.01% for the Lipper Money Market Funds Average. For the 12 months ended September 30, 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%, 0.18%, and 1.66% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 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 September 30, 2013, was 0.01%. Its seven-day simple annualized yield without waiver was −0.29%.* 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, coupled with the Fed's purchases of Treasuries as part of its ongoing "quantitative easing" efforts, has sustained downward pressure on short-term Treasury interest rates. With short-term rates at or near historic lows, it is a very good time to be a borrower of short-term cash. Unfortunately, money fund investors are receiving little or no compensation as lenders of short-term cash in the current environment. Yields in all sectors of the money market have continued their slow drift lower, pulled inexorably toward the federal funds rate, which currently averages under 0.10%. We are continuing to target only the highest-quality investments and prefer nonfinancial companies that are raising money for working capital or other credit-positive needs. Municipal obligations also continued to represent a substantial portion of the portfolio.
Our near-term outlook is for current money market conditions to continue largely unchanged. Supply is likely to remain constrained, and demand is not expected to change dramatically. While the longer-term market will continue to react to the prospects for Fed tapering, the money markets will remain anchored by the fed funds target rate, which we don't expect to change until sometime in 2015. As always, we are committed to managing a high-quality, diversified portfolio and will continue to focus on liquidity and stability of principal.