As mentioned a few days ago, the latest event in the financial crisis is the foreclosure mess and at this point we do not know how significant it will be and, as is frequently my preference, I am not hanging around to find out.
Our only exposure to domestic banks is with preferred stocks, one of which we sold and swapped into the PowerShares Emerging Market Debt Portfolio (PCY).
The reason behind picking this part of the market to rotate into is the extent to which many of the countries captured are on much firmer footing right now than the US, Europe or Japan. The reason for a dollar denominated fund for now is that the dollar has moved down very quickly of late and so I'd rather wait for the dollar to correct some either in price or time before increasing our non dollar fixed income exposure.
My past comments about about increasing foreign exposure slowly over several years also pertains to fixed income as well as equities although possibly in different proportions.