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 slow pace of United States economic growth continued with fourth quarter Gross Domestic Product (GDP) rising 2.1%. Low productivity and little capital investment seem to be restricting this second longest recovery in American history from reaching the historical full year growth rate average of 3.0%. GDP appears to be around 1.0% in the first quarter despite healthy consumer spending. We feel that further improvement to 3.0% in the second quarter of 2017 is expected, fueled by a rise in inventories and utilities consumption.

In March, the Federal Reserve (Fed) hiked short term interest rates as inflation and job growth were in line with current expectations. The quarter-point hike pushed the Fed Funds target range to between 0.75% and 1.00%. The Fed has signaled that it is ready to raise interest rates several more times this year.

During the past three months, US Treasury rates rose across the yield curve. The 10-year Treasury yield finished at 2.44%, after starting the quarter at 1.59%. Returns were negative across all major investment grade bond sectors for the quarter, with long maturity Treasuries suffering the most.

The Bond Fund outperformed (0.98%) relative to the Bloomberg Barclays Aggregate Bond Index (0.82%) in the first quarter. With credit spreads tightening during the period, the Fund’s overweight in the corporate sector contributed to performance. The Fund’s overweight in asset-backed securities detracted from performance.

The bond market has recently been reacting to events in Washington. Steady employment growth remains in place, inflation continues to be subdued, and interest rates are still low.

Total Fund Assets as of 03/31/2017 $1,006,509,351
Net Asset Value1 $19.80
Effective Duration2 5.62 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

March, 2017*
April, 2017*
May, 2017*

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