Chandler Bond Market Review

Economic Roundup May 2012

Consumer Prices
In March, the CPI showed consumer prices increased 2.7% on a year-over-year basis. The year-over-year Core CPI (CPI less food and energy) increased at a 2.3% rate. Improvement in the domestic economy, coupled with rising oil prices, raised investors’ concerns about accelerating inflation.

Labor Markets
The April employment report showed the economy added 115,000 jobs. The report was disappointing though the unemployment rate declined slightly to 8.1%. Although the unemployment rate remains elevated, current economic data suggests that the labor market is improving at a slow but steady pace.

Retail Sales
In March, Retail Sales rose 6.8% on a year-over-year basis. Consumer spending rebounded from the depths of the recession and recent activity has been healthy. Nevertheless, elevated unemployment levels continue to restrain consumer spending to some degree.

Housing Starts
Single-family housing starts edged down slightly in March to 462,000, compared to 463,000 in February. The housing market remains under pressure, but seems to have stabilized following several years of sharp declines.

Credit Spreads May 2012
Economic Data May 2012

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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