Fixed Income Market ~ 2nd Quarter 2010

The BarCap Aggregate Index rose 3.5% for the quarter as investors moved into bonds as fears of a double-dip recession were felt in the market.  Treasuries were particularly attractive to investors as a safe haven.  The demand drove up returns on the Citigroup Treasury Index to 4.6% for the quarter and brought rates on the 10 Year U.S. Treasury down to 2.93%.  Longer dated issues outperformed shorter dated issues as the rates declined and the yield curve flattened during the quarter. Within corporate credits, higher rated issues performed better than the speculative names.  The A-rated credits were up 3.6%, the B-rated credits were flat and everything below that was negative for the quarter. Even though inflation was modest to negative for the quarter, TIPS still performed well given their duration and treasury characteristics.