Economic Trends

GDP Q through Q August 2016 Second quarter annual growth rate of real gross domestic product (GDP) down 0.1% from advance measure: Second = 1.1% Advance = 1.2% The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE) and exports that were partly offset by negative contributions from private inventory investment, residential fixed investment, state and local government spending and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

US Unemployment Rate August 2016 Total nonfarm payroll employment rose by 151,000 in August, compared with an average monthly gain of 204,000 over the prior 12 months. The number of unemployed persons was essentially unchanged at 7.8 million in August, and the unemployment rate was 4.9 percent for the third month in a row. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 2.0 million in August. These individuals accounted for 26.1 percent of the unemployed. The civilian labor force participation rate was unchanged at 62.8 percent.

Inflation July 2016 CPI-U was unchanged in July on a seasonally adjusted basis. The index for all items less food and energy rose, but posted its smallest increase since March. The index for all items less food and energy increased 0.1 percent in July after rising 0.2 percent in June. The all items index was unchanged after rising in each of the 4 previous months. The Trimmed Mean PCE inflation rate for July was an annualized.77 percent, down from the overall PCE inflation rate for July which was 1.0 percent, annualized.

Blue Chip Rate Forecast September

Curve Steepness 6 September 2016 Spread – 10Yr CMT vs 2 Year CMT 10/31/151.41% 11/30/151.27% 12/31/151.21% 1/31/161.18% 2/29/ % 3/31/161.05% 4/30/161.06% 5/31/160.97% 6/30/ % 7/31/160.89% 8/31/160.78% 9/8/160.83%

Credit Spreads 7 August 2016 Moody's Liquidity-Stress Index (LSI) eased to 7.5% in August from 8.1% in July. The index fell to its lowest level this year in August on the back of continuing refinancing activity and a steady US economy. In August speculative-grade liquidity (SGL) rating upgrades outnumbered downgrades for the fourth month in a row, at six to five, as liquidity conditions in the energy sector continued to stabilize Moody's Liquidity-Stress Index falls when corporate liquidity appears to improve and rises when it appears to weaken.

Credit Spreads – TED Spread 8 September 2016 TED spread – 3-month LIBOR rate – 3 month T-bill interest rate Ted spread is the price difference between three- month futures contracts for US Treasuries and three-month contracts for Eurodollars having identical expiration months. The Ted spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers. As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing.