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
  • 30 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

Gross Domestic Product (GDP) declined 31.4% annualized for the second quarter of 2020 as the full economic effect of the COVID-19 pandemic became clear. Positively, unemployment rebounded from 11.1% to 7.9% over the quarter. The economic recovery is expected to continue, though third quarter GDP estimates vary widely from 28% to 35% annualized. Uncertainty about the impacts of the 2020 presidential election and of a potential new stimulus package account in part for the divergence.

The Federal Reserve (Fed) left the federal funds rate target unchanged at 0.00% - 0.25% this quarter. Surprisingly, the 2.0% inflation target was abandoned in August for a policy that targets an average rate of 2.0% over time. The Federal funds rate is expected to remain near zero at least until inflation reaches 2.0% and is on track to overshoot. Headline inflation currently stands at 1.3% (year-over-year).

U.S. Treasury rates remained exceptionally low during the second quarter. The 10 Year Treasury ended the quarter nearly unchanged at 0.68% versus 0.67% at the beginning of the quarter. Rates in two to seven-year maturities fell and the 30-year Treasury yield rose, causing the yield curve to steepen slightly over the quarter.

For the third quarter, The Commerce Bond Fund’s return of 1.40% outperformed the Bloomberg Barclays Index of 0.62%. The Fund’s overweight to corporate bonds relative to the benchmark contributed to performance. The Fund’s security selection and overweight in asset-backed securities detracted from performance.

Total Fund Assets as of 9/30/2020 $1,277,261,960
Net Asset Value1 $20.99
Effective Duration2 6.15 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

August 2020*
September 2020*
October 2020*

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.