2ND QUARTER FIXED INCOME

Fixed Income Market:   Bond prices in the second quarter revealed some investors’ doubts about how strong the economy will be in the coming years. This trend was a definite change from the first quarter when the mood was highly optimistic but also anticipatory of an inflationary trend.  The yield on the 10-year U.S. Treasury note (which moves inversely to prices) ended the quarter at 1.443%.  That was up from 0.931% at the end of last year but down from 1.749% at the end of March.

Other Assets:  We are not overly concerned about any period of sustained inflation. But our aversion to long-term bonds remains. We like maturities under two years and cash and alternative investments such as municipal tax liens and REITs.