Question-and-Answer Session
Operator
(Operator Instructions) We’ll pause a moment while questions compile. Your first question comes from Stephen Laws – Deutsche Bank Securities, Inc.
Stephen Laws – Deutsche Bank Securities, Inc.
I wanted to see if you could give us a little more detail about putting money to work during the quarter. Obviously leverage came down sequentially. Can you maybe talk about with the new capital you raised what type of leverage you put that new capital work at to blend overall portfolio leverage down and what type of spreads you were able to put in place on the new capital?
Joseph E. McAdam
During the quarter we did raise some equity capital, it was not a significant percentage of the firm’s overall capital but we did deploy it in line with our target leverage percentage as you pointed out and I think as we discussed in the last quarterly call, we had been looking to let a portfolio run off bring our leverage down during the first part of the second quarter and also some of the significant recovery in the asset values also played a part of that. A certain amount of reduction of the overall portfolio was in place late in the first quarter and into the early second quarter but as the prices declined the leverage stayed relatively high. The concept of the overall leverage target about 7.5 to 8 times our total capital is where we’re looking to maintain the portfolio. So I think it would be fair to say that the incremental capital that was raised during the quarter was deployed at sort of a similar leverage.
A significant change in the leverage during the portfolio came from the improvement in the actual collateral value of the portfolio. There were no sales of assets during the quarter.
Stephen Laws – Deutsche Bank Securities, Inc.
And one follow up if I may, Lloyd, you know we had the Fed meeting meet today and one descending vote but left funds unchanged at 2%. I’d love to get your comments on that overall in a bigger picture and maybe if you could share your personal views on what we’re going to see out of the Fed in your opinion here the remainder of the year.
Lloyd McAdams
I believe as we have discussed in the past it seems that the Fed is in a position of neither raising interest rates because of the negative consequences that would have on the housing market and reducing interest rates because of the negative consequences that will have on the current account deficit and the value of the dollar. Both of those as we all recognize quickly are very serious issues for the United States. Therefore the general outlook that I have and as I think we may discuss this some more with you is that the most probably outcome is that there will not be a material change in interest rates between now and the end of the year.
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