Inside This Issue - Second Quarter 2007
> Evaluating/Considering/Understanding Subprime Exposure
Recently, subprime mortgage loans have received quite a bit of press coverage. Concerns about improper lending practices, issuer defaults, and rising borrower default rates have led some to conclude that any security backed by subprime mortgages must be a bad investment. Before painting all investments backed by subprime loans with such a broad brush, it is important to recognize that not all subprime backed securities are performing poorly or are in risk of default. Rather, a large block of highly rated subprime-backed securities continue to provide investors with competitive yields with low credit risk, even under prevailing adverse market conditions for this sector of the mortgage market
> Positioning Portfolios for Event Risk in the Corporate Bond Market
For a three-year period starting in mid-2002, the interests of stockholders and corporate bondholders were nicely aligned.
> Subprime Market Captures Headlines—Fixed Income Sector Review
The second-quarter total return for corporate bonds was a negative 0.76%, primarily because of higher interest rates and the sector’s longer duration.
The close of the second quarter marked the one-year anniversary of a 5.25% federal funds rate, a policy that worked well.
Andrew Apostol joins Dwight as Client Portfolio Manager; Steven Clancy joins Dwight as Portfolio Manager, specializing in Mortgage-Backed Securities; and Donald Hill joins Dwight as Head of Insurance Business Development.
Investment Results as of 6/30/07 [login required]
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