Chandler Bond Market Review

February 2012 Economic Roundup

Consumer Prices
In December, the CPI showed that consumer prices increased 3.0% on a year-over-year basis. The year-over-year Core CPI (CPI less food and energy) increased at a 2.2% rate. Overall, price increases remained subdued, and the Federal Reserve has recently noted that some cost pressures have eased.

Labor Markets
The January employment report showed that the economy added 243,000 jobs with the six-month average at 167,000 jobs. The unemployment rate fell from 8.5% to 8.3%. This report was better than analysts’ expectations with many markets participants forecasting continued positive labor market momentum into early 2012. Although the unemployment rate remains elevated, current economic data suggests the labor markets maybe entering a period of slow sustained growth.

Retail Sales
In December, Retail Sales rose 6.5% on a year-over-year basis. Consumer spending has rebounded from the depths of the recession and recent activity has been moderate; however, high unemployment continues to restrain consumer spending.

Housing Starts
Single-family housing starts rose 4.4% in December to 470,000, compared to 450,000 in November. The housing market remains under pressure, but seems to have stabilized following several years of sharp declines, and some housing data has recently surprised to the upside.

NEED CREDIT SPREADS AND ECONOMIC DATA CHARTS

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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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