Overview
| Objective | Seeks current income exempt from federal income tax consistent with the preservation of capital. |
|---|---|
| Strategy | Focuses on a broad range of investment-grade municipal securities, typically issued by or on behalf of the states, territories and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities and political subdivisions. |
| Fund Manager | The Fund is managed by the Fixed Income Team, a group of senior-level investment professionals who average 27 years of experience. |
| Risk/Return |  In general, greater returns are associated with greater risks. |
Fund Statistics
| Inception Date | 02/21/95 |
|---|---|
| Ticker Symbol | CFNLX |
| Cusip | 200626703 |
| Minimum Initial Investment | $1,000 |
Commentary
Long-term Treasury yields rose sharply during the quarter as resilient economic growth, persistent inflation, heavy government borrowing and strong demand for capital from the AI investment cycle pushed the term premium higher. The 10-year Treasury yield climbed to its highest level since 2002, creating a challenging backdrop for fixed income markets and particularly longer-duration securities. Geopolitical tensions involving Iran and the Strait of Hormuz added to inflationary pressures as Brent crude again moved above $100 per barrel. Against this backdrop, the Federal Reserve raised its target rate by 25 basis points (bps) to 3.75–4.00% in September, its first increase since 2023, while maintaining a higher projected path for rates and inflation. Despite tighter financial conditions, economic growth remained resilient, supported by business investment and consumer spending. The Treasury curve steepened 11 bps and the municipal (muni) curve flattened by 23 bps during the quarter. The 10-year Treasury yield increased by 82 bps from 4.47% to 5.29% and the 10-year muni yield increased by 115 bps from 2.95% to 4.10%. The 10-year muni/treasury ratio increased to 78%. Demand for municipal bonds continued at a strong pace, supported by nearly $75 billion in net fund inflows year-to-date, according to JP Morgan. A healthy supply of tax-exempt debt persisted with roughly $163 billion issued in Q3, now at $458 billion for the year. New issuance is up over 4.5% year-over-year. Refunding deals made up over 28% of new supply and taxable supply comprised over 5%. In Q3, long-term maturitiesunderperformed shorter maturities, and lower-quality bonds outpaced higher-quality counterparts. Revenue bonds underperformed while credit spreads finished tighter for the quarter. Bloomberg’s high yield muni index outperformed their investment grade index by 80 bps.
For the third quarter, The Commerce National Tax-Free Fund’s return of -5.68% underperformed the Bloomberg 3-15 Year Blend benchmark of -5.40%. Longer durations detracted the most. The Fund’s cash position and exposures to the pre-refunded and IDR/PCR sectors performed the best. Wate/sewer, GO, and limited tax sectors lagged.
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.