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Fund Commentary

 
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Prime Obligations Portfolio

as of 3/31/17

Fund Commentary

The minutes from the Federal Open Market Committee (FOMC) meeting in February revealed a likelihood that rates would be increased “fairly soon.” At the same time, many FOMC members also indicated that a gradual tightening of monetary policy would continue to be appropriate. As a result, federal fund futures at the end of February were predicting only a 50% likelihood of a March hike. However, that increased to 100% quickly in early March after a number of Federal Reserve (Fed) officials began to lay the groundwork for a hike at the mid-March meeting. The London Interbank Offered Rate, or LIBOR, a key baseline for loans globally, continued to reset higher as investors demanded higher rates for term purchases that would mature after the anticipated March hike. As expected, the Fed increased the target range for the federal funds rate by 25 basis points (0.25%), to the 0.75% to 1.00% range.

The domestic labor market continued to strengthen in the first quarter. The unemployment rate continued to fall, even as more participants began looking for work, and average hourly earnings increased. As anticipated, the U.K. formally began its exit from the European Union (EU) by triggering Article 50 on March 29. This started the clock on the two-year timetable for the U.K. to negotiate its official exit terms from the EU.

For the quarter, the Portfolio provided a total return of 0.19%. We continue to position the Portfolio conservatively with a neutral duration strategy. Liquidity and principal preservation remain our primary objectives.

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

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