Market Review and Outlook 2nd Quarter 2007
The second quarter was a difficult one for the bond market and there was little shelter from the storm as interest rates rose across the yield curve. The capital markets continued to be volatile during the quarter, as concerns about sub-prime mortgages, the economy and terrorism ebbed and flowed. By quarter end, bond yields had increased modestly in what can be described as a bear steepener (e.g. long rates increased more than shorter rates). During most of the quarter and year to date we have focused on four key areas that have allowed us to outperform the market.