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

The U.S. economy grew 3.1% in the first quarter of 2019, up from a 2.2% growth rate in the fourth quarter 2018. Consumer spending grew at its slowest rate in a year, but business investment was surprisingly strong. Economists are forecasting Gross Domestic Product (GDP) to slow to 1.8% in the second quarter. Recent trade talks with China notwithstanding, we believe the trade war is weakening capital spending and manufacturing employment.

The Federal Reserve (Fed) continued its accommodative stance on interest rates in the second quarter. The federal funds rate was left unchanged at its 2.25%-2.50% target at the June meeting, and the market is forecasting a cut of at least 25 basis points (bps) at the July meeting

U.S. Treasury rates moved dramatically lower over the second quarter. The 10 year Treasury declined to 2.00% from 2.50% at the beginning of the quarter. Returns were positive for all bond sectors in the second quarter. Corporate bonds were the top performing sector.

For the second quarter, the Commerce Bond Fund’s return of 3.27% outperformed the Bloomberg Barclays Aggregate Bond Index of 3.08%. The Fund’s overweight to corporate bonds and underweight to mortgage-backed bonds added to performance. The Fund’s shorter duration relative to its benchmark detracted from performance.

Employment remains strong, inflation is tracking below the Federal Reserve’s target, and the economy continues to grow. However, we believe that continued consumer weakness and trade tensions may lead to slower growth in the second half of 2019.

Total Fund Assets as of 6/30/2019 $1,147,082,128
Net Asset Value1 $20.20
Effective Duration2 5.77 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

June 2019*
July 2019*
August 2019*

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