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 U.S. economy grew 3.0% in 2018, driven by consumer spending and diminishing tax cut benefits. Fourth quarter GDP, however, was a lower than expected 2.2%, and a continued slowdown is our consensus for 2019. The lingering effects of the government shutdown, year-end market turmoil, and a slump in consumer confidence have economists predicting first quarter 2019 GDP of 1.5%. We believe Consumer weakness is supported by recent contractions in discretionary spending. Regardless, most economists forecast GDP to rebound to 2.1%-2.4% for 2019.

The Federal Reserve pivoted from restrictive monetary policy to accommodation over the first quarter. The federal funds rate was left unchanged at its 2.25%-2.50% target at both the January meeting and the March meeting, but guidance for rate hikes was cut from two to zero after the March meeting. Also, the Fed announced a slow-down in its balance sheet run-off. Slower growth in consumer spending and global risks have turned the Fed cautious.

U.S. Treasury rates moved lower over the first quarter. The 10 year Treasury declined to 2.40% from 2.68% at the beginning of the quarter. Returns across bond sectors were positive for the quarter, with corporate bonds finishing as the top performing sector.

For the first quarter, the Commerce Bond Fund’s return of 3.19% outperformed the Bloomberg Barclays Aggregate Bond Index of 2.94%. An overweight to corporates and an underweight to mortgage-backed bonds added to performance. The Fund’s shorter duration relative to the benchmark detracted from performance. We expect inflation to remain subdued, leaving additional rate hikes by the Fed on hold and slower economic growth in the late stages of a prolonged expansion is the outlook for 2019.

Total Fund Assets as of 3/31/2019 $1,106,230,378
Net Asset Value1 $19.72
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 Holdings

March 2019*
April 2019*
May 2019*

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