OUTLOOK

"10-Year Yields Rise as Forecasted"

10/11/2007

On 9/4/07, we stated, "We believe the yield on the 10-Year Treasury Note will rise to 4.65% or more within the next 8 weeks."

Our forecast was correct.  The yield on the 10-Year Treasury Note rose to 4.65% or more within 8 weeks, reaching as high as 4.71% on 10/11/07.  Since 9/4/07 to present, we believe there has been a gradual flight out of quality, as investors have sold bonds in exchange for buying riskier assets.

Mark Yuan, CFA