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
  • 34 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 rapid economic recovery continued in the first quarter with Gross Domestic Product (GDP) increasing at a 6.40% annualized rate. The supply side of the economy is expected to continue to catch up with the demand side resulting in 7.00%-7.50% forecasted GDP growth for the full year. However, the surging number of delta variant COVID-19 cases is a near-term risk.

The Federal Reserve (Fed) left the federal funds target rate unchanged at 0.00% - 0.25% at its June meeting. Year-over-year headline inflation as measured by the Consumer Price Index (CPI) rose to 5.0% in May, the highest since August 2008. Households eager to spend along with supply shortages drove prices higher. Accordingly, the Fed discussed tapering of mortgage and treasury bond purchases. The Fed also forecasts two rate hikes in 2023 with seven members calling for one hike in 2022.

Long U.S. Treasury yields declined over the quarter as the bond market decided that any recovery induced inflation will be transitory. The 10 Year Treasury declined to 1.47% from 1.74% at the beginning of the quarter. Treasury yields for 20- and 30- year maturities saw similar declines, resulting in a flatter yield curve.

For the second quarter, The Commerce Bond Fund’s return of 2.22% outperformed the Bloomberg Barclays Aggregate Bond Index return of 1.83%. The Fund’s overweight to corporate credit relative to the benchmark contributed to performance. The Fund’s shorter duration relative to its benchmark detracted from performance.

While the recovery is still intact, we believe that GDP growth and inflation may be close to peaking. Fiscal stimulus measures aimed at combating the pandemic’s economic impact will continue to subside. As supply side challenges get resolved inflationary pressures should recede. The COVID-19 delta variant is emerging as a concern and we believe could diminish the chances of interest rates rising significantly in the coming quarter.

Total Fund Assets as of 6/30/2021 $1,201,750,757
Net Asset Value1 $20.83
Effective Duration2 5.79 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

July 2021*
August 2021*
September 2021*

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.