The document summarizes economic trends and market indicators in the United States. Treasury yields have generally decreased across maturity dates over the past year. The Federal Reserve raised interest rates in December 2015 and expects further gradual rate increases. First quarter GDP growth was modest at 0.5% but is estimated to rise to 2.5% in the second quarter. Core inflation remains below the Fed's 2% target. The unemployment rate rose slightly to 5% in March while payroll jobs increased more than expected. Commodity prices have risen from lows earlier this year but remain well below historic highs.

1. Economic and Treasury Market Review
1
Change
3-Month 0.01 0.21 0.20
6-Month 0.08 0.38 0.30
1-Year 0.21 0.55 0.34
2-Year 0.51 0.78 0.27
3-Year 0.85 0.93 0.08
5-Year 1.33 1.29 -0.04
10-Year 1.92 1.83 -0.09
30-Year 2.61 2.69 0.08
4/27/15 4/27/16
2 vs. 30 spread: +210bps. +191 bps.
Treasuries:  The yield curve has tightened over the past several years as low
inflation and the global slowdown have attracted buyers in the
long end while yields on shorter maturities have risen due to
additional Fed tightening fears
 Treasury issuance continues to decline due to a stronger economy
and more tax receipts
 Over the past 5 years, the 2-yr vs. 30-yr spread has traded
between +402 bps. in Feb ‘11 and +177 bps. in Jan ‘15
 The 25-yr average for the 2-yr vs. 30-yr spread has been approx.
+185 bps.
Fed Policy:  The Fed finally tightening at their Dec ‘15 FOMC meeting; this was
their first move since Dec ‘08 and their first tightening since Jun
’06
 The FOMC stated conditions warrant only gradual rate increases
going forward; likely two hikes this year
 The Fed’s actual rate path will depend on their economic outlook
and the data itself
 Their policy stance remains accommodative
 Upcoming FOMC meetings are slated for Jun 15, Jul 27, and Sep
21
GDP Growth:  1st Qtr. GDP was reported at +.5%, the weakest in two years
 Personal consumption , which represents 70% of GDP, was
reported at +1.9%
 2nd Qtr. ‘16 GDP estimates are closer to +2.5%
 2015 GDP rose +2.4%, while 2014 GDP increased +2.4%
 The strong dollar continues to hurt domestic companies with
international sales
Inflation:  Mar’s Core-CPI rose .1%, less than expected
 Feb’s Y-O-Y Core-CPI rose 2.2%, less than expected
 In 2015, the overall CPI rose .7%, while core inflation rose 2.1%
 The Fed has reiterated that inflation below 2% could pose risks to
the economy
Employment:  Mar’s unemployment rate rose .1% to 5.0%
 Mar’s nonfarm payrolls increased 215,000, while private payrolls
increased 195,000; both were stronger than street estimates
 A growing number of economists believe future employment
gains will be limited
 2.65 million jobs were created in ’15 vs. 3.11 million in ‘14
Commodities:  Oil is trading at $46 a barrel, h from $26 in Feb, but i from $107
in Jun ‘14
 Gold is trading at $1,267 an ounce, h from $1,050 in Dec, but i
from $1,700 in Jan ’13
 Copper is trading at $2.22 a pound, i from $4.62 in Feb ‘11
 The Reuters/Jefferies CRB Index has risen almost 20% from Feb
but has fallen almost 50% from Apr ’11