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Fund Commentary

 
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U.S. Government Select Portfolio

as of 6/30/17

Fund Commentary

Price action was generally positive across the world financial markets in the second quarter, as investors reacted to a meaningful acceleration in global growth. Overseas economies, in particular, appeared to be picking up steam. Stocks rallied behind the resulting improvement in investor risk sentiment, but oil lost ground due to a persistently high level of supply.

Bond yields moved lower in April and May based on investor comfort with the U.S. Federal Reserve’s (Fed) gradual approach to raising interest rates, but the market paused in June once the rhetoric from global central banks began to turn more hawkish. As widely anticipated, the Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points (0.25%) from 1.00% to 1.25% at its June meeting. Additionally, the FOMC provided key details of its plan to begin reducing the size of the Fed’s balance sheet, a process that is expected to commence later this year. As was the case with prior rate hikes in this cycle, money markets were quite orderly following the June increase. However, participation in the Fed’s Overnight Reverse Repurchase Agreement Facility spiked to nearly $400 billion at quarter end.

The Portfolio returned 0.16% for the quarter. In acknowledgement of the significant technical pressures in the market for short-duration government securities, we selectively added duration to take advantage of steepness in the money market yield curve and to remain neutral relative to the Portfolio’s peer group.

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An investment in the Money Market Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

Please carefully read the summary prospectus or prospectus and consider the investment objectives, risks, charges and expenses of Northern Institutional Funds before investing. Call 800-637-1380 to obtain a summary prospectus or prospectus, which contains this and other information about the Funds.

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