Chandler Bond Market Review

Economic Roundup January 2013

Consumer Prices
In November, overall CPI inflation fell to 1.8% on a year-over-year basis from 2.2% in October. The year-over-year Core CPI (CPI less food and energy) also fell slightly to 1.9% from 2.0% in October. The core inflation rate is below the Fed’s long-term goal of 2.0% and well below the trigger rate for policy action of 2.5%.

Retail Sales
In November, Retail Sales rose 3.7% on a year-over-year basis. On a month-over-month basis, Retail Sales rose 0.3% in November, lower than the consensus forecast of 0.6%. Overall, recent consumer spending trends have been modest.

Labor Markets
The December employment report showed that payrolls increased by 155,000 (in line with the consensus estimate), following a gain of 161,000 in November. Private payrolls advanced 168,000 while government jobs declined by 13,000. The unemployment rate held steady at 7.8% in December. Overall, improvement in the labor market continues to be modest and reflects an overall slow pace of growth in the domestic economy.

Housing Starts
Single-family housing starts declined 4.0% in November to 565,000 from 589,000 in October. However, housing permits rose 3.6% in November. Overall, housing starts fell back slightly in November after two months of strong gains. In our view, recent data suggests that the housing market continues to be firm.

Credit Spreads January 2013

Economic Data January 2013

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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