Chandler Bond Market Review

Economic Roundup June 2012

Consumer Prices
In April, overall CPI inflation softened to 2.3% from 2.7% in March on a year-over-year basis, driven primarily by a decline in energy prices. The year-over-year Core CPI (CPI less food and energy) increased at a 2.3% rate. The core rate remains slightly higher than the Fed’s inflation target of 2%.

Labor Markets
The May employment report showed the economy added just 69,000 jobs. The report was disappointing, and well below the consensus forecast of 150,000. Payroll jobs were also revised down for March and April by a combined total of 49,000. The unemployment rate rose to 8.2% in May from 8.1%. The overall employment report has been disappointing for the past three months and suggests the pace of the economic recovery is slowing down.

Retail Sales
In April, retail sales rose 6.4% on a year-over-year basis. Consumer spending has 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 rebounded in April, rising 2.3% to 492,000 compared to 481,000 in March. The housing market remains under pressure, but some data has surprised to the upside this year.

Credit Spreads June 2012
Economic Data June 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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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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