Chandler Bond Market Review

Economic Roundup March 2013

Consumer Prices
In January, overall CPI inflation fell to 1.6% on a year-over-year basis from 1.7% in December. 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 January, Retail Sales rose 4.4% on a year-over-year basis. On a month-over-month basis, Retail Sales rose 0.1% in January, in line with expectations. Overall, recent consumer spending trends have been modest.

Labor Markets
The February employment report showed that payrolls increased by 236,000 (exceeding the consensus estimate of 171,000). The unemployment rate fell to 7.7% from 7.9% in January. Private payrolls were up 246,000 (vs. expectations of 195,000), while government jobs fell 10,000 in February. The net revisions in nonfarm payrolls for December and January were down 15,000. Overall, improvement in the labor market continues to be modest.

Housing Starts
Single-family housing starts rose 0.8% in January to 613,000 from 608,000 in December. Multifamily starts fell 24.1% in January after spiking in December. Though housing starts were weaker than expected in January, there was an ongoing increase in housing permits. Housing permits rose 1.8% in the month which was slightly more than expected. In our view, recent data suggests that the housing market continues to improve.

Credit Spreads March 2013

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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