Chandler Bond Market Review

Economic Roundup 2013

Consumer Prices

In March, overall CPI inflation declined to 1.5% on a year-over-year basis from 2.0% in February.  The year-over-year Core CPI (CPI less food and energy) edged down to 1.9% from 2.0%.  The core inflation rate is slightly below the Fed’s long-term goal of 2.0% and remains below the trigger rate for policy action of 2.5%.

Retail Sales

In March, Retail Sales rose 2.8% on a year-over-year basis.  However, on a month-over-month basis, Retail Sales declined 0.4% in March.  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.  However, trends may be decelerating. 

Labor Markets

The April employment report showed that payrolls increased by 165,000 (better than the 153,000 consensus estimate).  The unemployment rate fell to 7.5% from 7.6%.  Private payrolls increased 176,000 (slightly ahead of expectations), while government jobs fell 11,000 in April.  The net revisions in nonfarm payrolls for February and March were up 114,000.  Overall, improvement in the labor market remains moderate.

Housing Starts

Single-family housing starts declined 4.8% in March to 619,000 from 650,000 in February.  Multi-family starts rose 31.1% in March.  Housing permits dropped 3.9% in the month which was weaker than expected.  Recent housing data suggests that the housing market may have lost some momentum after a relatively strong start to the year. 

Credit Spreads May 2013

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and views constitute judgments or relevant information as of the date of writing and such information may become outdated or superseded at any time without notice.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