Chandler Bond Market Review

Economic Roundup April 2013

Consumer Prices

In February, overall CPI inflation rose to 2.0% on a year-over-year basis, up from 1.6% in January.  The year-over-year Core CPI (CPI less food and energy) rose to 2.0% from 1.9%.  The core inflation rate is currently in line with the Fed’s long-term goal of 2.0% but remains below the trigger rate for policy action of 2.5%.

Retail Sales

In February, Retail Sales rose 4.6% on a year-over-year basis.  On a month-over-month basis, Retail Sales rose 1.1% in February, exceeding the 0.5% consensus estimate.  Overall, recent consumer spending trends have held up well in spite of headwinds from higher payroll taxes, rising gas prices, a delay in tax refunds, and ongoing uncertainty about the government’s fiscal policy.

Labor Markets

The March employment report showed that payrolls increased by just 88,000 (well below the 193,000 consensus estimate).  The unemployment rate fell to 7.6% from 7.7% in February driven by a steep decline in the labor force.  Private payrolls increased 95,000 (vs. expectations of 200,000), while government jobs fell 7,000 in March.  The net revisions in nonfarm payrolls for December and January were up 61,000.  Overall, improvement in the labor market continues to be modest.

Housing Starts

Single-family housing starts rose slightly in February to 618,000, up from 615,000 in January.  Multi-family starts rose 1.4% in February.  Housing permits rose 4.6% in the month which was better than expected.  In our view, recent data suggests that the housing market continues to improve.

Credit Spreads April 2013

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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