Capital markets

International bond markets will likely continue to see low yields in 2011. The first cautious hike in prime rates by the ECB is not anticipated before the end of 2011 at the earliest; the US Federal Reserve will probably only follow suit in 2012. As a consequence of the prevailing expansionary monetary policy, yields on German government bonds will likely remain on a low level in 2011. The same is true of the United States, where yields will probably rise only marginally by the end of 2011. Bonds issued by peripheral countries of the European Monetary Union should, however, remain under pressure. While the budgetary situation of these countries will likely improve, concerns about possible insolvency after expiry of the EU/IMF rescue package will doubtless persist – especially as regards Greece, Ireland and Portugal. Should the economic upturn lead to an increase in corporate profits, this would open up price potential on the equity markets. Any increases in prices in 2011 will, however, probably be subject to considerable volatility.