Chandler Bond Market Review

Economic Roundup November 2011

Consumer Prices
In September, the CPI showed that consumer prices increased 3.9% on a year-over-year basis. The year-over-year Core CPI (CPI less food and energy) increased at a 2.0% rate. Although some producer prices have begun to increase, prices on consumer goods are not expected to rise sharply in the months ahead. The Federal Reserve has noted that it is monitoring commodity price increases, but believes that over the coming quarters, headline and core inflation is likely to settle at levels consistent with their mandate.

Retail Sales
In September, Retail Sales rose 7.9% on a year-over-year basis. Consumer spending has rebounded from the depths of the recession and recent activity has been moderate; however, activity is still far short of the heights of the previous economic expansion as a weak job market and high energy prices restrain consumer spending.

Labor Markets
The October employment report showed that the economy added 80,000 jobs and the previous two month’s totalswere revised higher by 102,000. The unemployment rate fell to 9.0 from 9.1%. This report was an improvement; nevertheless, the employment situation in the country remains poor. Even though the economic recovery is more than two years old, the pace of recovery in the labor market has been weak, and is one of the primary reasons why the recovery has been tepid.

Housing Starts
Single-family housing starts rose 1.7% in September to 425,000, compared to 418,000 in August. The housing market remains weak but seems to have stabilized following several years of sharp declines.

Credit Spreads November 2011
Economic Data November 2011

RISKS AND OTHER IMPORTANT CONSIDERATIONS

This report is provided for general information purposes only and should not be construed as specific legal, tax, or financial planning advice. All opinions and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice. This report is not intended to constitute an offer, solicitation, recommendation or advice regarding any securities or investment strategy. This information should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest, credit, and market risk. Interest rate risk: the value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market in general could decline due to economic conditions,especially during periods of rising interest rates.

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