Chandler Bond Market Review

Economic Roundup February 2013

Consumer Prices
In December, overall CPI inflation fell to 1.7% on a year-over-year basis from 1.8% in November. The year-over-year Core CPI (CPI less food and energy) was unchanged at 1.9%. The core inflation rate remains 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 December, Retail Sales rose 4.7% on a year-over-year basis. On a month-over-month basis, Retail Sales rose 0.5% in December, better than the consensus forecast of 0.2%. Overall, recent consumer spending trends have been modest.

Labor Markets
The January employment report showed that payrolls increased by 157,000 (falling short of the consensus estimate of 175,000). However, payroll growth at the end of last year was stronger than previously believed, with a cumulative upward revision to payroll growth in November and December of 156,000. Private payrolls advanced 166,000 in January while government jobs declined by 9,000. The unemployment rate edged up slightly to 7.9% in January from 7.8% in December, driven by an increase in the labor force. 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 rose 8.1% in December to 616,000 from 570,000 in November. Multifamily starts rose 20.3% in December, and housing permits rose 0.3%. In our view, recent data suggests that the housing market continues to 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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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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