Keep in mind that the market tends to price mortgages for fast prepayments, so getting the prepayment story right can really pay off. We look at every single asset every day, so we have a very good idea where to look for the best assets and which assets are bid too high for the environment. Currently we are living a lesson in bond math. Prices are up, yields are down. In our case, this means that our NAV is up but our net spread, ROE and therefore dividend are expected to be a bit lower going forward. This is the math of the environment.
In last week’s offering, we indicated that we see the spread environment for new investments is in the 150 to 170 range. This compares to the 171 for us in Q2. We expect leverage on our balance sheet to remain about the same, so that means just doing the math that the ROE should contract by around 100 basis points. The equity raise will continue to help us with our expense ratio, and that will provide a little bit of an offset for this.