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 COVID-19 pandemic staggered the U.S. economy in the first half of 2020, and the recent resurgence of the virus threatens to hamper a recovery. Regardless, economists expect positive economic growth to return in 2021. First quarter Gross Domestic Product (GDP) was -5.0% annualized. Estimates for the second quarter are for a -33.0% to -37.0% annualized contraction. The unemployment rate touched 14.7% in April before rebounding somewhat to 11.1% for June.

The Federal Reserve (Fed) remains accommodative. The federal funds rate is expected to stay at the current target of 0.00% -0.25% at least through the end of 2021. Quantitative easing through purchases of U.S. Treasuries, mortgage-backed securities, and some corporate bonds continues.

U.S. Treasury rates remained exceptionally low during the second quarter. The 10 Year Treasury ended the quarter almost unchanged at 0.66% 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 second quarter, the Commerce Bond Fund’s return of 5.56% outperformed the Bloomberg Barclays Aggregate Index return of 2.90%. 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.

The U.S. economy continues to work through the COVID-19 pandemic. Despite the recent resurgence of the virus and the corresponding consumer spending slowdown, economists predict double digit annualized growth in the second half of 2020 with the unemployment rate improving to about 9% by year end.

Total Fund Assets as of 6/30/2020 $1,249,777,812
Net Asset Value1 $20.84
Effective Duration2 5.84 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 2020*
July 2020*
August 2020*

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