Short-Term Government Fund

Overview

Objective

Seeks current income consistent with preservation of principal.

Strategy

Invests primarily in U.S. Government securities and government mortgage-backed 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.
The Short-Term Government Fund's net asset value and yield are not guaranteed by the U.S. Government or by its agencies, instrumentalities or sponsored enterprises.

Fund Statistics

Inception Date 12/12/94
Ticker Symbol CFSTX
Cusip 200626109
Minimum Initial Investment $1,000

Commentary

Gross Domestic Product (GDP) declined 31.4% annualized for the second quarter of 2020 as the full economic effect of the COVID-19 pandemic is becoming more clear. Positively, unemployment rebounded from 11.1% to 7.9% over the quarter. The economic recovery is expected to continue, though third quarter GDP estimates vary widely from 28% to 35% annualized. Uncertainty about the impacts of the 2020 presidential election and of a potential new stimulus package account in part for the divergence.

The Federal Reserve (Fed) left the federal funds rate target unchanged at 0.00% - 0.25% this quarter. Surprisingly, the 2.0% inflation target was abandoned in August for a policy that targets an average rate of 2.0% over time. The Federal funds rate is expected to remain near zero at least until inflation reaches 2.0% and is on track to overshoot. Headline inflation currently stands at 1.3% (year-over-year).

U.S. Treasury rates remained exceptionally low over the second quarter. The 5-year Treasury yield slightly declined to 0.28% from 0.29% at the beginning of the quarter. Short Treasury rates in general fell over the quarter, due in part to the Fed’s continued large-scale purchases of Treasuries.

For the third quarter, The Commerce Short Term Government Fund’s return of 0.22% outperformed the Bloomberg Barclays 1-5 Year Government Index of 0.13%. The Fund’s relative overweight to mortgage-backed securities contributed to performance. The Fund’s shorter duration relative to the benchmark detracted from performance.

Total Fund Assets as of 9/30/2020 $72,004,206
Net Asset Value1 $17.31
Effective Duration2 2.17 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. These risks may result in greater share price volatility.

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 Short-Term Government Holdings

August 2020*
September 2020*
October 2020*

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.