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

The COVID-19 pandemic staggered the U.S. economy in the first half of 2020, and the recent resurgence of the virus threatens to hamper a recovery. Regardless, economists expect positive economic growth to return in 2021. First quarter Gross Domestic Product (GDP) was -5.0% annualized. Estimates for the second quarter are for a -33.0% to -37.0% annualized contraction. The unemployment rate touched 14.7% in April before rebounding somewhat to 11.1% for June.

The Federal Reserve (Fed) remains accommodative. The federal funds rate is expected to stay at the current target of 0.00%-0.25% at least through the end of 2021. Quantitative easing through purchases of U.S. Treasuries, mortgage-backed securities, and some corporate bonds continues.

U.S. Treasury rates remained exceptionally low over the second quarter. The 5-year Treasury yield fell to 0.29% from 0.38% at the beginning of the quarter. Short Treasury rates in general fell over the quarter, due in part to the Fed’s large-scale purchases of Treasuries.

For the second quarter, the Commerce Short Term Government Fund’s return of 0.64% outperformed the Bloomberg Barclays 1-5 Year Government Index return of 0.41%. The Fund’s relative overweight to mortgage-backed securities contributed to performance. The Fund’s shorter duration relative to the benchmark detracted from performance.

The U.S. economy continues to work through the COVID-19 pandemic. Despite the recent resurgence of the virus and the corresponding consumer spending slowdown, economists predict double digit annualized growth in the second half of 2020 with the unemployment rate improving to about 9% by year end.

Total Fund Assets as of 6/30/2020 $77,146,510
Net Asset Value1 $17.34
Effective Duration2 2.10 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

June 2020*
July 2020*
August 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.

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