Bond Fund

Overview

Objective

Seeks total return through current income and, secondarily, capital appreciation.

Strategy

Invests primarily in a broad range of government and investment-grade corporate bonds and other fixed-income securities.

Fund Manager

Scott Colbert, CFA

  • Joined Commerce in 1993
  • 37 years of experience
  • Fund manager since Fund inception

Risk/Return

LOW - - • - - - - HIGH

In general, greater returns are associated with greater risks.

Fund Statistics

Inception Date 12/12/94
Ticker Symbol CFBNX
Cusip 200626208
Minimum Initial Investment $1,000

Commentary

The economy’s year-end momentum has carried over into the first quarter of 2024, and recent economic data shows that the US economy is not moving quickly toward recession. Higher than expected inflation and employment figures pushed consensus expectations of rate cuts to later in the year.

The Federal Reserve (Fed) left the target federal funds rate unchanged at 5.25%-5.50% at both its January and March meetings. Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation measure, eased to 2.80% year-over-year in February, down sharply from the 4.80% rate a year ago. Employment remained healthy with non-farm payroll growth registering over 200,000 jobs in both January and February. Committee members and the bond market shifted rate cut consensus expectations from six to a total of three, with the first cut expected in July. The Fed needs to see inflation moving sustainably toward 2.00% before they begin cutting.

Treasury bonds sold off over the first quarter with yields increasing approximately 25-40 basis points in the intermediate part of the curve. The yield on the 10-year treasury increased 32 basis points to end the quarter at 4.20%..

For the first quarter, the Commerce Bond Fund’s return of -0.19% outperformed the Bloomberg Aggregate Bond Index return of -0.78%. An underweight allocation to agency mortgage-backed securities contributed to performance. An underweight allocation to agency debentures detracted from performance.

Falling job openings, a slightly rising unemployment rate, and an expected slow-down in consumer discretionary spending are developing headwinds for the economy. Still, the Fed forecasts Gross Domestic Product (GDP) growth of 2.80% for the first quarter of 2024, and market consensus is for a full-year growth rate of 2.20%.

Total Fund Assets as of 3/31/2024 $1,149,553,827
Net Asset Value1 $17.69
Effective Duration2 6.17 Yrs.

Footnotes:
1. The Net Asset Value represents the assets of the fund (ex dividend) by the total number of shares.
2. Duration is the method determining a bond's price sensitivity, given changes in interest rates.
3. The composition of the portfolio is subject to change in the future.

Portfolio Holdings

Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. When interest rates rise, the prices of bonds and therefore the value of fixed income mutual fund shares can decrease and an investor can lose principal value. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund's shares. Mortgage-backed securities are subject to prepayment risks, which may result in greater share price volatility. Asset-backed securities may be less liquid than other securities and therefore more difficult to value and liquidate, if necessary. Foreign investments may be more volatile than investment in U.S. securities and will be subject to the risks of currency fluctuations and political developments.

Holdings and allocations shown are unaudited, and may not be representative of current or future investments. Holdings and allocations may not include the Fund's entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

Commerce Bond Holdings

March 2024*
April 2024*
May 2024*

A prospectus for the Commerce Funds containing more complete information may be obtained by calling 1-800-995-6365 or by downloading it from this website. Please consider a Fund's objectives, risks, and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The mutual funds referred to in this Web site are offered and sold only to persons residing in the United States and are offered by prospectus only. The prospectus contains more complete information about the funds, including charges and expenses, and should be read carefully before investing.

The method of calculation of the 30-Day Standardized Subsidized Yield is mandated by the Securities and Exchange Commission and is determined by dividing the net investment income per share earned during the last 30 days of the period by the maximum public offering price (“POP”) per share on the last day of the period. This number is then annualized. The 30-Day Standardized Subsidized Yield reflects fee waivers and/or expense reimbursements recorded by the Fund during the period. Without waivers and/or reimbursements, yields would be reduced. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders. The 30-Day Standardized Unsubsidized Yield does not adjust for any fee waivers and/ or expense reimbursements in effect. If the Fund does not incur any fee waivers and/or expense reimbursements during the period, the 30-Day Standard Subsidized Yield and 30-Day Standardized Unsubsidized Yield will be identical.