High Grade Core Intermediate 2nd Quarter 2011

In the second quarter, high quality bonds benefited from a rise in investor concerns about the long-term viability of the economic recovery.  The key drivers of this movement to bonds included:

• A renewed focus on the debt crisis in Greece
• Rising concerns about the calamity in Japan would negatively impact global GDP growth
• Weaker U.S. economic data
• The consequent decline in global equities and other risk assets that dominated most of the period

Yet, beneath the tranquil surface of positive fixed income returns, important sector cross currents are developing that warrant consideration as we look towards the second half of the year.