Chandler Bond Market Review

Market Summary April 2012

Treasury rates moved higher in March, driven by ongoing improvement in domestic economic data and reduced market expectation of further asset purchases from the Federal Reserve. In addition, rising oil prices, coupled with improving domestic economic data, has raised investor concerns about accelerating inflation, driving bond yields higher. However, Operation Twist (which expires at the end of June) continues to put downward pressure on longer-term interest rates.

We believe domestic economic data remains indicative of a slow growth environment. The labor market continues to improve and the manufacturing sector remains healthy. In March, the unemployment rate fell to 8.2% from 8.3% in February, and non-farm payrolls grew by an average of approximately 212,000 per month throughout the first quarter. Consumer confidence also continues to show strength, despite the near 20% rise in gas prices since the beginning of the year. Though political and economic turmoil in Europe continues to create volatility in global financial markets, European leaders have made progress in addressing the regions debt crisis.

In March, the Federal Reserve announced it would retain the policy rate range of 0.0-0.25%. The Fed provided a generally upbeat assessment of the economy, and held off on announcing any new forms of quantitative easing, despite market speculation to the contrary. There was no change to the Fed’s assurance the fed funds rate will remain exceptionally low through late 2014. Recent increases in gas prices were acknowledged, but the Fed expects the impact on overall inflation will be temporary. The Fed noted that while strains on global financial markets have eased, they continue to pose a significant downside risk to the economic outlook. The next FOMC meeting is scheduled for April 24th and 25th.

Treasury Yields April 2012


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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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