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

U.S. economic growth started to pick up some momentum in the second quarter, with Gross Domestic Product (GDP) growth reported at 3.1%, the highest since 2015. Consumer spending and business investment contributed to the improvement. We believe that hurricane disruptions will distort third quarter economic growth, with early estimates at 2.4%. We feel the near-term effects on economic data following Hurricanes Harvey, Irma and Maria are not expected to have a lasting impact.

In September, the Federal Reserve (Fed) officially announced the start of its balance-sheet unwind plans. Fed Chair Janet Yellen continued to indicate her expectations for a gradual increase in the fed funds rate. No change to the fed funds rate was made at the September Federal Open Market Committee (FOMC) meeting. However, we believe as long as inflation remains stable or rising a December rate hike is likely.

During the past three months, US Treasury rates were higher across the yield curve with yields on shorter maturities (1 to 3 year) rising more than intermediate and long maturities’ yields. The 10-year Treasury yield finished at 2.33%, after starting the quarter at 2.30%. Returns were positive across all major investment grade bond sectors for the third quarter, with Corporate bonds again leading the pack.

The Bond Fund outperformed 1.01% relative to the Bloomberg Barclays Aggregate Bond Index 0.85% in the third quarter. The Fund’s underweight in Treasuries and overweight in the corporate sector contributed to performance. The Fund’s overweight in asset-backed securities detracted from performance.

We believe economic data will feel the impact of the Hurricanes in the third and fourth quarter. Obtaining a correct read on economic growth will be challenging, but we believe any dip in GDP growth is expected to be followed by a rebound.

Total Fund Assets as of 09/30/2017 $1,069,024,966
Net Asset Value1 $20.03
Effective Duration2 5.60 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 Fund Holdings

August, 2017*
September, 2017*
October, 2017*

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.