NOTICE: 2019 Capital Gains Available. View PDF here.

Money Market Funds Commentary

2Q 2019

This commentary addresses the Cavanal Hill U.S. Treasury Fund and Government Securities Money Market Fund:

How did you position your portfolios during the quarter?

The odds of a Federal Open Market Committee (FOMC) easing grew as the quarter progressed. This was a major change from last year, when the debate about FOMC action in 2019 was more focused on how many rate increases would be announced. Escalating tensions with Mexico and China contributed to uncertainty regarding near-term growth prospects.

Reflecting the darker economic picture, the 3-month- Treasury Bill to 10-year Treasury curve inverted significantly, from a high of 100 basis points (1.00%) late last year to as low as -23 basis points (-0.23%) in late May. This is typically viewed as a harbinger of recession. The Overnight Index Swap1 market carved a similar path, predicting as many as three rate cuts this year.

In light of a possible easing later in the year, we selected slightly longer-term Treasury notes, adding incremental yield to the Funds while locking those yields in place for a period after the first widely anticipated FOMC move in July.**

Also adding value were Secured Overnight Financing Rate1 (SOFR) floating-rate notes, which outperformed overnight repurchase agreements (repos) during the quarter. The SOFR rate created as an alternative to LIBOR1, which is being phased out, and has gained a great deal of market acceptance over the past year.**

Our Fixed Income Clearing Corp1 (FICC) sponsored repurchase agreements (repos) continued to add value, and nationwide, the FICC-sponsored repo market reached a size of roughly $160 billion as of the end of May. Meanwhile, worldwide money market assets continued to grow: Globally, money fund assets rose by $83.7 billion, or 1.4%, to break the $6.1 trillion level during the first quarter, according to the Investment Company Institute. The gain was propelled primarily in large part by gains in Chinese and U.S. money funds.**

What is your outlook, and how are you positioning the funds?

The markets now anticipate one or more cuts to the federal funds target rate over the rest of the year. Our longer-term Treasury holdings—in both funds—and our SOFR floating rate notes in the Government Securities Money Market Fund should help soften the blow of declining yields.**

Past performance is no guarantee of future results.

Portfolio composition is subject to change


The London Interbank Offered Rate (LIBOR) is the average rate charged by large banks in London for loans to each other. LIBOR is a relatively volatile rate and is typically quoted in maturities of one month, three months, six months and one year. Overnight Index Swap an overnight index swap uses an overnight rate index, such as the federal funds rate as the underlying rate for the floating leg, while the fixed leg would be set at a rate agreed on by both parties. Secured Overnight Financing Rate (SOFR) was originally known as the broad Treasuries financing rate, the secured overnight financing rate is a measure of the cost of borrowing cash on an overnight basis in the U.S. Treasury repo markets. It is the U.S. successor to Libor. Fixed Income Clearing Corporation (FICC) is an agency that deals with the confirmation, settlement, and delivery of fixed-income assets in the U.S. The agency ensures the systematic and efficient settlement of U.S. government securities and mortgage-backed security (MBS) transactions in the market.

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

An investor should consider a fund’s investment objectives, risks and charges and expenses carefully before investing or sending money. This and other important information about an investment company can be found in the fund’s prospectus. To obtain a Cavanal Hill Funds prospectus or summary prospectus, please call 800-762- 7085 or visit us at Please read it carefully before investing.

Cavanal Hill Investment Management, Inc. is an SEC registered investment adviser and a wholly-owned subsidiary of BOKF, NA, a wholly-owned subsidiary of BOK Financial Corporation, a financial holding company (“BOKF”). BOKF, NA serves as the custodian for the Cavanal Hill Funds. Cavanal Hill Investment Management, Inc. provides investment advice, administration and other services for the Funds and receives a fee for providing such services as fully described in the prospectus. The Funds are distributed by Cavanal Hill Distributors, Inc., a registered Broker/Dealer, member FINRA and wholly-owned subsidiary of BOKF. SEC registration does not imply a certain level of skill or training. Bank of Oklahoma and its affiliates Bank of Arkansas, Bank of Albuquerque, Bank of Texas, Bank of Arizona, Mobank and Colorado State Bank and Trust offer investment management and administrative services nationally and administer more than $35 billion in assets for numerous clients, including foundations and endowments, and high-net-worth individuals.
Commentary provided is for the period ended 6/30/2019 and is designed to provide a frame of reference and does not constitute investment advice. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. The opinions expressed herein reflect the judgment of the authors at this date and are subject to change without notice and are not a complete analysis of any sector, industry or security. This document contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the Cavanal Hill Funds, the securities and credit markets and the economy in general. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” variations of such words and similar expressions are intended to identify such forwardlooking statements. Management judgments relating to and discussion of the value and potential future value or performance of any security, group of securities, type of security or market segment involve judgments as to expected events and are inherently forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. The potential realization of these forward-looking statements is subject to a number of limitations and risks, which are described in the Funds’ prospectuses, and investors or potential investors, are cautioned to review the Funds’ prospectuses, and the description of such risks. Neither the Funds nor the Funds’ investment adviser, Cavanal Hill, undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events or otherwise.


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