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Global

10 June 2009

Global Economic Perspectives

All Together Now

Deutsche Bank Securities Inc.

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 106/05/2009

Economics

Table of Contents

Key Economic Forecasts .................................. Page 02

All Together Now ............................................. Page 03

Central Bank Watch.......................................... Page 09

Global Data Monitor ......................................... 2

Charts of the Week .......................................... Page 13

Global Week Ahead.......................................... Page 14

Financial Forecasts ........................................... Page 16

Main Deutsche Bank Global Economics Publications ........................ Page 17

Research Team

Peter Hooper (+1) 212 250-7352 [email protected]

Thomas Mayer (+44) 20 754-72884 [email protected]

Torsten Slok (+1) 212 250-2155 [email protected]

Michael Biggs (+44) 20 754-55506 [email protected]

Mark Wall (+44) 20 754-52087 [email protected]

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The consensus view, especially as embodied in recent official forecasts, is that Europe will lag the US in the up-coming recovery. We take a clos-er look at cyclical correlations among key countries in the past and find that cyclical developments of the euro area have indeed lagged those of the US on average but not when both areas were affected by a common shock. Against this, developments in the UK have been more closely aligned with those in the US throughout.

The consensus view and average past experience are at odds with the most recent developments. We find that the euro area economy turned with a very small lag after the US and has caught up with the US since then. We identify the improvement in global financial markets as an im-portant force exerting a positive impulse on all countries simultaneously.

If our analysis holds and recent developments continue consensus ex-pectations for the euro area will have to be revised up significantly in the course of the rest of the year. This could induce an earlier exit from non-standard monetary policies in Europe than the consensus presently ex-pects. At the same time, however, we expect the cyclical rebound not to be sustained in the medium-term future.

Purchasing managers indices in the US and Europe: Simultaneous recovery?

30

35

40

45

50

55

60

65

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

US

Euro area

UK

Source: Markit, DB Global Markets Research

10 June 2009 Global Economic Perspectives


Key Economic Forecasts

Real GDP

% growthb

Consumer Prices

% growthc

Current Account

% of GDPd

Fiscal Balance

% of GDP

2008 2009F 2010F 2008 2009F 2010F 2008 2009F 2010F 2008 2009F 2010FUS 1.1 -3.1 0.6 3.8 -1.7 0.1 -4.7 -3.5 -3.0 -3.2 -13.5 -7.7

Japan -0.7 -8.0 -0.3 1.4 -1.1 -0.7 3.2 1.6 2.3 -4.4 -6.6 -7.7

Euroland 0.7 -3.9 0.8 3.3 0.3 1.0 -0.8 -1.4 -1.0 -1.5 -5.0 -6.6

Germany 1.0 -4.0 0.4 2.8 0.3 0.8 6.2 3.3 4.5 -0.2 -3.9 -5.5

France 0.7 -2.8 0.7 3.2 0.1 0.7 -3.5 -4.0 -4.0 -3.3 -5.9 -6.4

Italy -0.9 -3.6 0.6 3.5 0.7 1.1 -2.0 -1.5 -1.5 -2.6 -5.2 -5.4

Spain 1.2 -3.6 -1.5 4.2 -0.1 0.9 -10.0 -7.0 -6.0 -1.3 -6.2 -6.9

UK 0.7 -3.8 1.2 3.6 1.0 0.9 -1.7 -1.5 -0.8 -6.7 -10.6 -9.9

Sweden -0.5 -3.5 1.0 3.5 -0.2 0.7 8.3 7.5 7.0 4.3 1.0 -2.0

Denmark -1.3 -3.0 0.8 3.4 1.0 1.5 1.7 0.8 1.3 2.9 0.0 -2.5

Norway 2.0 -1.0 0.8 3.8 1.5 1.5 18.4 17.0 13.0 16.0 13.0 10.0

Poland 4.8 -2.7 1.0 3.3 2.5 2.6 -5.5 -1.5 -2.2 -3.9 -6.9 -5.4

Hungary 0.5 -6.0 0.8 6.1 4.7 5.4 -8.4 -1.6 -1.4 -3.4 -3.8 -3.2

Czech Republic 3.7 -4.1 1.7 6.4 1.4 1.4 -3.2 -0.2 -0.4 -1.5 -4.8 -3.8

Australia 2.4 0.5 1.4 4.4 1.4 1.7 -4.3 -3.6 -4.2 1.7 -2.9 -4.2

Canada 0.5 1.7 2.8 2.4 0.6 2.3 0.6 -2.9 -2.8 0.0 -2.1 -1.8

Asia (ex Japan) 6.8 3.8 5.7 6.6 0.7 2.4 4.7 4.7 4.6 -1.5 -4.9 -4.7

India 7.3 4.6 6.1 8.9 1.2 3.7 -3.4 -2.0 -1.6 -9.4 -10.1 -9.2

China 9.0 7.5 7.2 5.9 0.0 2.0 7.2 7.2 6.7 -0.4 -4.0 -4.6

Latin America 4.1 -1.3 2.9 8.8 6.8 6.1 -0.4 -2.2 -1.8 -0.8 -0.8 -0.6

Brazil 5.1 -1.5 4.2 5.9 4.0 4.5 -1.8 -0.8 -1.5 -1.5 -2.6 -1.2

EMEA 4.3 -2.6 3.7 12.5 8.7 8.0 -0.1 -2.9 -3.5 0.1 -5.5 -3.9

Russia 5.6 -4.4 4.0 13.3 11.2 10.3 6.0 -0.9 -2.0 3.4 -6.5 -4.5

G7 0.6 -3.8 0.6 3.2 -0.8 0.3

World 2.8 -1.7 2.4 5.2 1.0 2.0

(a) Euroland forecasts as at the last forecast round on 30/03/2009. Bold figures signal upward revisions, bold, underlined figures signal downward revisions. (b) GDP figures refer to working day adjusted data. (c) HICP figures for euro-zone countries and the UK (d) Current account figures for Euro area countries include intra regional transactions

Forecasts: G7 quarterly GDP growth

% qoq saar/annual: % yoy Q1 08 Q2 08 Q3 08 Q4 08 2008 Q1 09F Q2 09F Q3 09F Q4 09F 2009F 2010F

US 0.9 2.8 -0.5 -6.3 1.1 -5.7 -2.0 -1.5 -0.5 -3.1 0.6

Japan 3.4 -3.5 -2.5 -14.4 -0.7 -15.2 -4.5 -0.5 3.0 -8.0 -0.3Euroland 2.8 -1.0 -1.0 -7.2 0.7 -10.0 -2.8 0.8 1.2 -3.9 0.8 Germany 6.2 -2.0 -2.2 -8.8 1.0 -15.2 -1.3 1.6 -1.2 -4.0 0.4 France 1.6 -1.6 -0.8 -6.0 0.7 -4.8 -3.0 -2.0 1.2 -2.8 0.7 Italy 2.0 -2.5 -3.2 -8.4 -0.9 -9.6 -3.9 0.0 1.6 -3.6 0.6UK 1.6 -0.1 -2.8 -6.0 0.7 -6.9 -2.9 -1.5 -0.3 -3.8 1.2

Canada -0.9 0.6 0.9 -3.4 0.5 -6.7 -1.8 2.0 2.5 1.7 2.8

G7 1.9 0.3 -1.3 -7.8 0.6 -8.5 -2.6 -0.8 0.4 -3.8 0.6

Sources: National authorities, DB Global Markets Research



All Together Now

The consensus view, especially as embodied in recent official forecasts, is that Europe will lag the US in the up-coming recovery. We take a closer look at cyclical correlations among key countries in the past and find that cyclical developments of the euro area have indeed lagged those of the US on average but not when both areas were af-fected by a common shock. Against this, devel-opments in the UK have been more closely aligned with those in the US throughout.

The consensus view and average past experience are at odds with the most recent developments. We find that euro area economy turned with a very small lag after the US and has caught up with the US since then. We identify the improve-ment in global financial markets as an important force exerting a positive impulse on all countries simultaneously.

If our analysis holds and recent developments continue consensus expectations for the euro area will have to be revised up significantly in the course of the rest of the year. This could induce an earlier exit from non-standard monetary poli-cies in Europe than the consensus presently ex-pects. At the same time, however, we expect the cyclical rebound not to be sustained in the me-dium-term future.

Surprisingly united

It is widely believed that the US tends to lead the global business cycle while Europe (and other regions follow). Recent economic forecasts by the members of the US Federal Open Market Committee for the US and by the ECB staff (endorsed by the Council at its June meeting) reflect this belief. While the US economy is seen to re-bound significantly in 2010 the euro area economy is ex-pected to remain sluggish and return to positive growth rates only as of the middle of next year (see Figure 1).

Figure 1: Real GDP growth

2009 2010

US -2.0 to -1.3 2.0 to 3.0

Euro area -5.1 to -4.1 -1.0 to 0.4

Sources: Federal Reserve and ECB

However, recent economic developments are at odds with this view. As Figure 2 shows, the composite pur-

chasing managers’ indexes in Europe have been closely aligned with the corresponding index in the US. The UK index turned at the same time as its US counterpart and is now rising at a faster pace. And while the euro area index turned with a slight delay it has meanwhile caught up with the US index. These indexes are good monthly proxies for GDP growth and suggest that growth in the US and euro area is presently running at the same speed while UK growth is ahead of both (for an update of global business cycle indicators see the appendix to this article).

Figure 2: Composite purchasing managers indices in

the US and Europe

30

35

40

45

50

55

60

65

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

US

Euro area

UK

Source: Markit, Haver, Deutsche Bank

In the following, we take a closer look at the correlation of business cycles among major industrial countries. Our main conclusions are (1) country-specific shocks are transmitted from the US to other countries with a lag, but the US remains little affected by shocks originating else-where; (2) when countries are affected by common shocks business cycles move closely together; and (3) since with the default of Lehman Bros. the financial crisis became a common shock business cycle developments have been closely aligned since then. Specifically, as the US sub-prime mortgages crisis developed into a broadly based financial crisis events in one country were quickly transmitted on financial markets to other countries. Thus, the default of Lehman caused significant negative spill-over effects and the subsequent launch of bank support and stabilisation programmes in the US and elsewhere likewise triggered positive spill-over effects. Our analysis suggests that all major countries are likely to recover in 2009-2010 fairly closely together, but it does not imply that the rebound will necessarily be sustained or be of equal strength everywhere.



A few observations from history

A casual look at GDP developments in the major industrial countries over the last four decades suggests that the US led the cycle at several occasions, the UK tended to move along or to quickly follow the US, the euro area repeatedly lagged US developments, and Japan often moved idio-syncratically.

From Figure 3, which shows year-on-year growth of GDP in the US and the euro area, we see that with the excep-tion of the recovery from the first oil price shock in 1975, US GDP growth has tended to lead euro area growth. A closer inspection of the developments in 1974-75 reveals that even in this episode the US turn-around occurred slightly faster than that in Euroland. Similarly, growth peaked earlier in the US during the present cycle. Devel-opments during the last cycle are shown in more detail in Figure 4, which compares the performance of the com-posite purchasing managers’ indexes on a monthly basis in the two areas. The chart illustrates the earlier recovery of the US from the mini-recession after the burst of the dot.com bubble and the earlier weakening as the present financial crisis began with troubles in the US sub-prime mortgage market. It also repeats the point made in Figure 2 that at present the euro area seems to catch up quickly with the US.

In contrast to the euro area, cyclical developments in the UK have more often led than lagged developments in the US. As Figure 5 shows, The UK economy recovered ahead of the US from the downturns caused by the two oil price shocks in the mid- and end-1970s. It generally turned down along with the US, with the exception of the mini-recession of 2001 in the US that did not affect the UK. The UK lagged the US in the recovery from the reces-sion of the early 1990s and, as Figure 6 shows, in the more recent downturn.

Finally, as Figure 7 shows, Japan led the US in the recov-ery from the first oil price shock but followed the US in the upturn from the second. During the second half of the 1980s and the 1990s developments in Japan were little correlated with those in the US. Japan fell into recession together with the US after the burst of the dot.com bub-ble but recovered later (from a lower level). It seems to have moved broadly along with the US during the present downturn (but contracted more sharply in the recent past).

Figure 3: GDP growth in the US and Euro area

-4

-2

0

2

4

6

8

10

71 74 77 80 83 86 89 92 95 98 01 04 07

US

EA

% yoy

Source: OECD, Haver Deutsche Bank

Figure 4: Composite PMIs in the US and Euro area

30

35

40

45

50

55

60

65

98 99 00 01 02 03 04 05 06 07 08

US

Euro area


Figure 5: GDP growth in the US and UK

-6

-4

-2

0

2

4

6

8

10

12

71 74 77 80 83 86 89 92 95 98 01 04 07

US

UK

% yoy




Figure 6: Composite PMIs in the US and UK

30

35

40

45

50

55

60

65

98 99 00 01 02 03 04 05 06 07 08

US

UK


Figure 7: GDP growth in the US and Japan

-4

-2

0

2

4

6

8

10

12

71 74 77 80 83 86 89 92 95 98 01 04 07

US

Japan

% yoy


Shock analysis with a VAR

In order to better identify the typical cyclical relationship among the countries we use impulse response simula-tions with a simple Vector-autoregressive (VAR) model (where quarter-on-quarter GDP growth in each country is modeled as a function of lagged growth in the same and the other countries). As we have found the US in the pre-vious section to move in tandem or to lead other countries most of the time we shock US growth by one standard deviation and plot the response of the other countries in Figures 8-10. This analysis suggests that an impulse ema-nating from the US is being felt in the same quarter in the UK and Japan but affects the euro area with a lag of on average one quarter. Interestingly, the size of the spill-over of US cyclical variations to the other countries is very similar. A one-standard-deviation move in US GDP growth induces an immediate rise in GDP growth of about ¾% elsewhere.

Figure 8: Euro area response to a US shock

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1 2 3 4 5 6 7 8 9 10

Impulse response ofeuro area to US shock

Source: Deutsche Bank

Figure 9: UK response to a US shock

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1 2 3 4 5 6 7 8 9 10

Impulse response of UKto US shock


Figure 10: Japan response to a US shock

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1 2 3 4 5 6 7 8 9 10

Impulse response ofJapan to US shock




Why lags may have shortened

The experience of the past as described in the previous two sections is somewhat at variance with the most re-cent experience of cyclical correlation described in the introductory section of this note. Growth especially in the euro area at present seems to be more closely correlated with the US than on average in the past. What could be the reason for this?

Already in the past, growth was closely correlated across the Atlantic when both regions were affected by a com-mon shock, such as the oil shocks of the 1970s (see Fig-ure 2). The present downturn began in the US, when prob-lems in the sub-prime section of the US mortgage market surfaced. Hence, initially growth in Europe held up while growth in the US began to weaken. However, as prob-lems in the US mortgage market spread to other asset classes, and in particular when the collapse of Lehman triggered a global banking crisis, developments became highly synchronised. Soaring risk and liquidity premiums in the financial sector exerted a very strong negative impulse on global economic activity, with little differences in tim-ing. As efforts to stabilise the banking sector got under way in all major countries financial markets began to calm simultaneously in most regions of the world, gradually reversing the negative shock unleashed by the Lehman default. Hence, it seems that the global improvement in financial markets helped all major economies almost si-multaneously (with only a very small lag between the US and the euro area, which has meanwhile been closed, see Figure 2).

This is not to say, however, that country-specific policies have not made a difference. We have argued that the UK, for instance, is on its way for a more dynamic recovery than some of its peers largely because the stabilisation of the banking system and the re-opening of the credit chan-nel were addressed a little earlier than elsewhere.

Conclusion and outlook

In this note we have argued that recovery from the depth of the financial crisis seems more synchronised between the US and Europe than average recoveries in the past. We have explained the closer correlation with more or less parallel moves in economic policy and, perhaps more importantly, with international spill-over effects of national policy initiatives through financial markets. However, it seems that consensus expectations for euro area GDP growth during the next 18 months fail to take account of the closer synchronisation. Figure 11 shows the euro area growth response to consensus expectations for US eco-nomic recovery based on our above described VAR mod-el.

The path of euro area recovery predicted by the VAR model is closely aligned with consensus expectations for this region. However, if recovery this time is more closely aligned between the two economies than on average in the past, the euro area would recover sooner and perhaps more vigorously than presently envisaged by the consen-sus. This view is reflected in Deutsche Bank’s forecast, also plotted in Figure 11. Hence, if our analysis holds, euro area economists, and especially those at the ECB, will be positively surprised by the recovery of the region.

Figure 11: Euro area recovery under different scenar-

ios

-3

-2

-1

0

1

2

06/09 09/09 12/09 03/10 06/10 09/10 12/10

VAR

Consensus

DB

Euro area GDP growth, % qoq saar


Still, as we have argued elsewhere (see our GEP from 13 May 2009), we do not expect the rebound to be sus-tained. Higher capital market rates, higher oil prices, and the unwinding of fiscal policy stimulus are likely to create headwinds for the economy as of mid-2010, and hence we see another, negative growth surprise for the consen-sus view of sustained recovery in all major industrial economies later next year. The likely renewed economic weakening could be more pronounced in the euro area than in the US or the UK. First, housing market turned later in euro area countries (following the US and the UK markets with a lag of about two years and one year, re-spectively), and they are therefore likely to weigh on the economy for some more time. Second, with the share of loans in euro area banks’ assets higher than in the other countries (where securities play a greater role), write-offs are likely to materialise at a slower pace. This is likely to keep the banking sector weaker for longer, creating an obstacle to a sustained increase in net credit flows.

Thomas Mayer, (44) 20 7547 2884 Michael Biggs, (44) 20 7545 5506



Appendix: Global business cycle indicators

Figure 1: Global IP

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

01/07 05/07 09/07 01/08 05/08 09/08 01/09 05/09

IP, % mom

3mma

Global IP growth April estimates based ondata for 64% of the sample


Figure 3: PMI and IP

30

35

40

45

50

55

60

2001 2002 2003 2004 2005 2006 2007 2008 2009

-35

-25

-15

-5

5

15

Global PMI manufacturing

Global IP, 3m/3m saar (rhs)


Figure 5: Global IP

-35-30-25-20-15-10-505

101520

01/07 07/07 01/08 07/08 01/09

Industrial

EM

IP growth, 3m/3m saar


Figure 2: Breadth of IP growth

0

10

20

30

40

50

60

70

80

90

01/07 05/07 09/07 01/08 05/08 09/08 01/09

Proportion ofcountries achievingpositive IP growth


Figure 4: EMEA bringing up the rear

-50

-40

-30

-20

-10

0

10

20

30

01/07 07/07 01/08 07/08 01/09

EM

Latam

Asia

Emea

IP growth, 3m/3m saar


Figure 6: PMIs suggest further gains

-5

-3

-1

1

3

5

7

2007 2008 2009

-8

-6

-4

-2

0

2

4

6

8

10

12Change in PMI (previousmonth)

Change in 3m/3m IPgrowth (rhs)




Figure 7: Global trade has started to recover

-15

-10

-5

0

5

10

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

Exports (USD), % mom

Imports (USD), % mom

Global trade Growth based on countries that have released April trade numbers


Figure 9: First May numbers are weak

-20

-15

-10

-5

0

5

10

15

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

May

-09

Exports (USD), % mom

Imports (USD), % mom

Global tradeEarly releases for May are less promising (4 countries)


Figure 11: EM leads the industrial countries

-15

-10

-5

0

5

10

03/07 09/07 03/08 09/08 03/09

Industrial

EM

Exports, USD


Figure 8: In imports as well as exports

-20

-15

-10

-5

0

5

10

01/07 05/07 09/07 01/08 05/08 09/08 01/09 05/09

Industrial

EM

Imports, % mom


Figure 10: Asia leads

-20

-15

-10

-5

0

5

10

15

01/07 07/07 01/08 07/08 01/09

EM Latam

EM Asia

EM EMEA

Exports, USD


Figure 12: Asia trade likely to be up in May (3m/3m)

-80

-60

-40

-20

0

20

40

60

80

01/07 05/07 09/07 01/08 05/08 09/08 01/09 05/09

Exports

Imports

EM AsiaUSD, 3m/3m saar




Central Bank Watch US Prospects for a bottoming of the US economy later this year have been improving, though the economy is still in decline for now. The Fed continues to strive to bring down private market credit rates via its MBS purchases and TALF. The backup in Treasury yields of late has made this task more difficult in the mortgage market. At the April FOMC meeting, the Fed left the door open to doing more, but conditions have not moved in a direction that bolster the case for doing so. We expect that by the Fed’s reckoning, overall financial conditions have im-proved some, and the backup in Treasury yields reflects to a considerable extent improved economic prospects and a backing away from depression fears. So long as the associated increase in mortgage rates does not signifi-cantly worsen the prospects for the housing market and the broader economy, the Fed is unlikely to alter its cur-rent limited commitment to intervening in the Treasury market. But the rise in Treasury and mortgage rates does add some downside risk to the economic outlook, and we still see the most likely path for the economy as consis-tent with a Fed that will be on hold for well into 2010. Current Jun09 Sep09 Mar10 Fed funds rate 0 - 0.25 0 - 0.25 0 - 0.25 0 - 0.25 Japan The BoJ has focused on stability of money markets and financial position of corporate sectors. Although they have introduced outright purchase of CP, corporate bonds and equities, they have maintained 0.1% at their policy rate with interest payments on excess reserve at the same rate. We believe the Bank of Japan would maintain its passive stance toward a return to the zero interest rate regime and quantitative monetary easing. The target over-night call rate would remain 0.1% for a long time.

Current Jun09 Sep09 Mar10 ON rate 0.10 0.10 0.10 0.10

Euroland The ECB left policy rates unchanged in June, as expected. The policy stance was described as “appropriate”, sug-gesting that the pause will extend into next month at least. The new 12-month refinancing operation begins later this month and the EUR60bn covered bond purchasing pro-gramme will begin within the next several weeks. For the time being, the ECB will be in implementation and moni-toring mode. The latest staff forecast revisions were no-table for the large downward adjustments to the outlook for GDP; the forecasts were implicitly endorsed by the Council. With more positive momentum emerging in the data, the risk is more weighted towards the Council being positively surprised than negatively surprised. However, with the period of negative headline inflation only to begin

in June, the ECB won’t be turning towards the policy exit soon. Given our doubts about the sustainability of the recovery, our baseline view is 1% refi rates until at least end 2010.

Current Jun09 Sep09 Mar10

Refi rate 1.00 1.00 1.00 1.00 UK At its June meeting the MPC confirmed that it intends to deliver GBP125bn of quantitative easing, upped from GBP75bn at the previous meeting. This is likely to be completed over the next two months. Strengthening real economy news is likely to limit the total QE programme to this new amount, with the remaining GBP25bn of an agreed GBP150bn limit unlikely to be sanctioned in our view if the recovery story gains traction. In terms of the exit strategy, we do not see policy easing withdrawn for at least a year, with interest rates rising in H2 2010. Current Jun09 Sep09 Mar10 Bank rate 0.50 0.50 0.50 0.50

Key rates in the G3 countries Key rates in the G3 countries

0

1

2

3

4

5

6

7

99 00 01 02 03 04 05 06 07 08 09 10

% %

BoJECB refiFed Funds

Forecast

Source: DB Global Markets Research

Sweden Following 175bps, 100bps and 50bps moves at the Dec, Feb and Apr meetings, recent comments by Deputy Gov-ernor Nyberg suggest that rates may not fall further than their current of 0.5% (next meeting: 2 July).

Current Jun09 Sep09 Mar10 Repo rate 0.50 0.50 0.50 0.50

Switzerland The SNB cut its target rate from 0.5% to 0.25% in March. It also began FX intervention on account of recent CHF strength. Next scheduled meeting: 18 June.

Current Jun09 Sep09 Mar10 3M Libor tgt 0.25 0.25 0.25 0.25



Central Bank Watch (continued) Key rates in the peripheral European countries

0

1

2

3

4

5

6

7

99 00 01 02 03 04 05 06 07 08 09 10

%

0

1

2

3

4

5

6

7%Switzerland 3m interbank rate

UK repo rateSweden repo rate

Forecast


Canada The Bank of Canada kept the cash rate unchanged at 0.25% at its June meeting, as was widely expected.


ON rate 0.25 0.25 0.25 0.25

Australia The RBA left the cash rate unchanged at 3%.Our base case remains, however, that the evolution of conditions will most likely see the RBA maintaining, and in fact exer-cising,its easing bias through end-2009.


ON rate 3.00 3.00 2.75 2.50

New Zealand After easing by 575bps in consecutive meetings, we think the RBNZ will most likely retain the OCR at 2.5%. More assuredly, whilst the Bank will have to acknowledge the improvement in seen in global financial markets and leading economic indicators in both NZ and offshore, the Bank will maintain a strong easing bias, not least due to continued strengthening seen in the NZ Dollar. We would be surprised if the RBNZ did not express discomfort with the NZ Dollar explicitly. An easing bias will likely be com-municated most obviously by repeating the key final two sentences from the April statement i.e. “We expect to keep the OCR at or below the current level through until the latter part of 2010. The OCR could still move modestly lower over the coming quarters”. The Bank’s updated economic projections, which will be revised heavily com-pared to those published in March, will reflect this stance. Current Jun09 Sep09 Mar10 ON rate 2.50 2.50 2.50 2.50

Key rates in the Peripheral $-bloc

Official interest rates (cash rates)

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

%

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New ZealandAustraliaCanada

Forecast


China Given the excessive lending growth early this year, and improvement in short-term economic outlook, we expect no more rate cuts in the remainder of this year. But a small 27bp cut remains possible in early 2010, when the yoy GDP growth confirms the second dip of the economy. Also, we do not expect any reserve requirement cuts in the near term, given that the liquidity in the banking sys-tem is abundunt and loan growth is slowing.

Current Jun09 Sep09 Mar10 1-year rate 2.25 2.25 2.25 1.98

India While the economy appears be nearing a bottom and positive sentiments have emanated from the favorable outcome of the Parliament elections, risks to growth have not fully subsided. External demand remains very weak, concerns about corporate sector leverage continues to linger despite some easing of fund raising conditions, ex-cess capacity at the manufacturing sector has negative implications for private investment, and institutional and regulatory impediments to FDI are not likely to subside soon. Against this backdrop, we expect the Reserve Bank of India (RBI) to ease monetary policy in the near term by 25bps. Despite a pick up in world oil prices, inflation risks are low due to food prices remaining stable, the rupee's recent strength, and the widening output gap. Subsequent to the next policy easing, we expect a prolonged pause from the RBI as world economic and financial conditions stay fragile. The RBI would consider raising interest rates only when demand and inflation begin to pick up appre-ciably. A policy rate hike hence will not take place till the first quarter of the next financial year (April-June 2010), in our view.

Current Sep09 Mar10 Jun10

Repo rate 4.75 4.50 4.50 5.25



Central Bank Watch (continued)

Brazil

The Central Bank monetary policy cut the Selic overnight rate by 100bp to 10.25% in April, reducing the pace of easing (the previous move had been a 150bp cut in March). We believe that there is room for further lowering interest rates. While the economy seems to be recuperat-ing from the 4Q08 slump, the recovery has been quite slow. We believe that GDP growth was negative again in 1Q09 and expect the economy to shrink by 1.5% this year. Moreover, we expect consumer prices to rise by just 4.0% in 2009, staying below the 4.5% target. Thus, we still expect the Selic rate to drop to 9.0% or less at the end of the easing cycle. Current Jun09 Sep09 Mar10 O/N rate 10.25 9.50 9.00 9.00

Russia On June 5th the CBR undertook yet another interest rate reduction of 50 basis points with respect to the refinanc-ing rate. The most recent reduction in the refinancing rate is the third such step so far this year, which brought the refinancing rate to 11.5%. The CBR also pursued a gradual increase in reserve requirements for commercial banks to 1.0% on May 1, to 1.5% on June 1, to 2.0% on July 1 and to 2.5% on Aug 1. The main rationale for the monetary easing via lower interest rates is to facilitate the growth in lending by banks to the real sector of the economy in view of the severity of the ongoing economic slowdown. Another crucial factor is the decline in inflation - the 12-month inflation rate dropped by 1.6 percentage points

since the beginning of April, thus creating scope for the reduction in the policy rate. In line with the pronounce-ments of the representatives of the CBR we expect fur-ther reductions in the refinancing rate to take place later this year in tandem with the decline in inflation. A lower refinancing rate reduces banks' funding costs and sup-ports interest margins. Current Sep09 Mar10 Jun10

CBR refi rate 11.50 11.00 11.00

Key rates in major emerging markets

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2002 2003 2004 2005 2006 2007 2008 2009 2010

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Global data monitor: Recent developments and near-term forecasts B’bergcode Q2-08 Q3-08 Q4-08 Q1-09 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun-09

OECD leading indicators (6M change, %, ann.) OECD -2.0 -4.3 -7.8 -9.6 -9.5 -9.7 -9.5 -8.8 US OLEDUSA -2.2 -4.7 -8.8 -11.4 -11.1 -11.6 -11.6 -11.3 Euro area OLEDEU12 -2.4 -5.0 -7.4 -8.6 -9.0 -8.8 -8.1 -6.9 Japan OLEDJAPN -2.9 -3.5 -8.3 -13.2 -12.1 -13.4 -14.3 -14.2 China OLEDCHIN 15.3 11.1 4.9 3.6 3.1 3.4 4.3 5.5 India OLEDINDI 6.7 3.9 0.1 -1.7 -1.6 -1.8 -1.6 Russia OLEDRUSS 7.3 1.8 -8.1 -15.3 -13.8 -15.5 -16.5 Brazil OLEDBRAZ 4.4 3.4 -1.6 -6.5 -5.7 -7.3 Purchasing manager indices Global (manufacturing) 51.0 48.4 38.6 37.6 36.7 37.5 38.4 42.5 45.3 US (manufacturing ISM) NAPMPMI 49.1 47.4 36.1 35.9 35.6 35.8 36.3 40.1 42.8 Euro area (composite) 50.8 47.6 40.2 37.6 38.3 36.2 38.3 41.1 44.0 45.3 Japan (manufacturing) SEASPMI 47.6 46.1 36.6 31.7 29.6 31.6 33.8 41.4 46.6 China (manufacturing) CPMINDX 54.5 50.1 42.4 44.0 42.2 45.1 44.8 50.1 51.2 India (manufacturing) 57.8 57.7 47.5 47.7 46.7 47.0 49.5 53.3 55.7 Russia (manufacturing) 52.1 49.9 40.0 39.0 34.4 40.6 42.0 43.4 45.3 Other business surveys US dur. goods orders (%pop1) DGNOCHNG 0.2 -1.6 -5.7 -2.8 -7.8 1.6 -2.2 1.7 Japanese Tankan (LI) JTFIFILA 5.0 -3.0 -24.0 -58.0 Euro area EC sentiment EUESEMU 97.5 89.9 75.8 65.7 67.2 65.3 64.7 67.2 69.3 Industrial production (%pop1) US IP CHNG -4.4 -9.0 -12.9 -19.1 -2.1 -1.0 -1.7 -0.5 -0.2 Euro area EUITEMUM -7.8 -10.9 -23.0 -27.0 -2.7 -2.5 -1.4 Japan JNIPMOM -4.8 -12.3 -38.0 -63.3 -10.1 -9.4 1.6 5.2 Retail sales (%pop1) US RSTAMOM 1.4 -5.4 -23.9 -5.6 1.7 0.4 -1.3 -0.4 0.5 Euro area RSSAEMUM -2.7 -2.2 -3.2 -3.7 -0.4 -0.5 -0.1 0.2 Japan (household spending) JHHSLERY -7.6 -1.9 1.5 -3.3 -0.8 0.3 -0.2 -0.9 Labour market US non-farm payrolls2 NFPTCH -153 -208 -553 -691 -741 -681 -652 -504 -345 Euro area unemployment (%) UMRTEMU 7.4 7.6 8.0 8.7 8.4 8.7 8.9 9.2 Japanese unemployment (%) JNUE 4.0 4.0 4.0 4.4 4.1 4.4 4.8 5.0 CP inflation (%yoy) US CPICHNG 4.4 5.3 1.6 0.0 0.0 0.2 -0.4 -0.7 Euro area ECCPEMUY 3.6 3.8 2.3 1.0 1.1 1.2 0.6 0.6 0.0 Japan JCPNSGM 1.4 2.2 1.0 -0.1 0.0 -0.1 -0.3 -0.1 China CNCPIYOY 7.8 5.3 2.5 -0.6 0.9 -1.7 -1.1 -1.4 India INWHOLEY 9.5 12.5 8.6 3.0 4.9 3.5 0.7 0.4 Russia RUCPIYOY 14.9 14.9 13.7 13.7 13.4 13.9 14.0 13.1 Brazil 5.6 6.3 6.2 5.8 5.8 5.9 5.6 5.5 Current account (USD bn)3 US (trade balance, g+s) USTBTOT -60.5 -60.3 -46.8 -30.0 -36.2 -26.1 -27.6 -29.5 Euro area -8.8 -11.8 -15.4 -11.6 -16.3 -10.0 -8.5 Japan JNBPAB 16.1 12.6 7.2 5.9 1.2 7.4 9.2 9.8 China (trade in goods) 20.5 26.2 31.6 25.0 41.7 6.6 26.6 16.7 Russia (trade in goods) RUCACAL 16.5 17.0 10.1 6.1 6.1 5.3 6.8 Other indicators Oil prices (Brent, USD/b) EUCRBRDT 122.4 116.0 54.7 44.6 43.6 43.4 46.8 50.2 57.6 FX reserves China (USD bn) CNGFOREX 1808.8 1905.6 1946.0 1953.7 1913.5 1912.1 1953.7

Quarterly data in shaded areas are quarter-to-date. Monthly data in the shaded areas are forecasts. (1) % pop = % change this period over previous period. Quarter on quarter growth rates is annualised. (2) pop change in ‘000, quarterly data are averages of monthly changes. (3) Quarterly data are averages of monthly balances.

Sources: Bloomberg, Reuters, Eurostat, European Commission, OECD, Bank of Japan, National statistical offices.



Charts of the Week

Chart 1. US wage growth is likely to slow a little further as unemployment rate continues to rise …

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%, 6m ar

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Wages (ls) Unemployment rate(rs)

US unemployment & hourly earnings

Source: BLS, DB Global Markets Research

Chart 3. EA GDP plunged the most in 13 years in Q1…

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-4.5

-3.5

-2.5

-1.5

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InvestmentGovt. consumption

Pvt.consumptionReal GDP, %qoq

% %Contribution to Euroarea GDP

Source: Eurostat, DB Global Markets Research

Chart 5. Japan ecowatchers outlook hit 20 month high…

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Japan : eco watchers outlook & GDP%yoy Index, adv 2 m

Source: ESRI, Global Markets Research

Chart 2. …while core orders is still in downtrend, though total factory orders has improved

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Source: Census, DB Global Markets Research

Chart 4. …while German factory orders stabilized

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Orders (ls) IP (rs)

German factory orders & industrial productionIndex Index

Source: Bundesbank, DB Global Markets Research

Chart 6. …while Canadian jobless rate continued to rise

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Canada: employment & unemployment rate %Thousands, mom

Source: Statcan, DB Global Markets Research



Global Week Ahead: Thursday, 11 June – Wednesday, 17 June • Dollar Bloc: In the US, May’s retail sales report will be the focal point – expected to show a pick up in consumer spending. We will get

more information about the current mood of consumers with the release of preliminary Michigan sentiment for June which is expected to show another modest improvement. We envisage the NAHB housing index to remain broadly unchanged, while housing starts should show slight improvement whereas permits figure is likely to come on the softer side. On the inflation front, we will have CPI and PPI reports for May. The release of May’s IP and June’s NY Fed numbers will provide us the snapshot of activity in the manufacturing sector. Besides, current account balance (Q1’09) and business inventories (April) are also scheduled for release. In Australia, the release calendar will focus on May’s participation rate. In New Zealand, April’s retail sales data is due this week. Besides, the food price index is releasing on Thursday – likely to show further signs of moderation in food price inflation.

• Europe: In the Eurozone, it will be interesting to watch the June ZEW survey for Euroland and Germany following a rise shown by other business surveys. On the activity side, we will receive area wide IP data for April, May’s zonal, French and Spanish HICP and euro area trade balance figure for April. In the UK, the markets will closely study the minutes of the June MPC meeting. Data wise, focus will be on the May employment report. Besides, May’s CPI data is also scheduled for release.In Switzerland, May’s combined PPI and IPI data are scheduled for release. In Scandinavia, Swedish CPI data is due on Thursday.

• Asia incl. Japan: In Japan, the BoJ target rate decision will attract market’s attention. On the data front, consumer confidence is due this week. In China, May’s IP data is due on Friday. In India, April’s IP data should show modest improvement.

Country GMT Release DB

Expected Actual Consensus Previous Thursday, 11 June

CHINA -- Trade balance (May) USD18.2bn USD14.9bn USD13.1bn

AUSTRALIA 01:30 Participation rate (May) 65.4% 65.4%

CHINA 02:00 Fixed asset investment(ytd) (May) (30.2%) (31.0%) (30.5%)

INDIA 06:30 WPI (May) 0.2% 0.5%

SWEDEN 07:30 CPI headline (May) 0.1% (-0.5%) 0.2% (-0.1%)

US 12:30 Initial jobless claims (Jun 6) 614.0k 621.0k

US 12:30 Retail sales ex autos (May) 0.1% 0.2% -0.5% (-7.7%)

US 12:30 Retail sales (May) 0.5% 0.5% -0.4% (-10.1%)

US 14:00 Business inventories (Apr) -0.9% -1.0% -1.0% (-5.1%)

MEXICO 19:30 Gross fixed investment (Mar) -7.0% -6.1% -12.1%

NEW ZEALAND 22:45 Retail trade (Apr) 0.1% (-3.5%) 0.2% (-3.9%) -0.4% (-2.1%)

NEW ZEALAND 22:45 Retail trade ex-Auto (Apr) 0.4% (2.5%) 0.4% 0.5% (2.3%)

NEW ZEALAND 22:45 Food price index (May) 0.2% (6.7%) -0.6% (7.6%)

Events and Meetings: NORWAY: Norges Bank’s Qvigstad to hold speech in Oslo. EUROLAND: EU’s Kroes to hold meeting with Swedish competition authority in Stockholm. EUROLAND: ECB to publish monthly bulletin – 08:00 GMT. GERMANY: German Chancellor Merkel to hold speech in Paris – 10:30 GMT. CANADA: Bank of Canada’s Carney to hold speech in Montreal – 17:50 GMT. UK: Bank of England to publish its quarterly inflation attitudes survey – 08:30 GMT. US: Treasury’s Baukol to hold speech in Montreal – 13:00 GMT. US: Treasury’s Sperling to testify on corporate pay in Washington – 14:00 GMT. US: Fed’s Lockhart to hold speech in Atlanta – 17:05 GMT.

Friday, 12 June

CHINA -- M2 (May) (25.3%) (25.9%) (26.0%)

INDIA -- Industrial production (Apr) (-1.5%) (-0.1%) (-2.3%)

CHINA 02:00 Industrial production (May) (7.8%) (7.7%) (7.3%)

CHINA 02:00 Retail sales (May) (14.5%) (15.0%) (14.8%)

JAPAN 05:00 Consumer confidence (May) 34.0 33.2

FRANCE 06:45 HICP (May) 0.2% (-0.2%) 0.1% (0.1%)

EUROLAND 09:00 Industrial production (Apr) -0.4% (-19.8%) -2.0% (-20.2%)

US 12:30 Import prices (May) 1.0% 1.4% (-17.5%) 1.6% (-16.3%)

US 14:00 Consumer sentiment prelim (Jun) 68.5 69.5 68.7

Events and Meetings: CZECH: Czech National Bank to hold seminar on Banking stress tests in Prague – 07:00 GMT. EUROLAND: ECB’s Trichet (11:30 GMT) and (15:30 GMT) to hold speech in Sofia. GERMANY: German Chancellor Merkel to visit Potsdam – 08:50 GMT. HUNGARY: National Bank of Hungary to publish minutes of its May rate setting meeting – 12:00 GMT. UK: Bank of England’s Fisher to hold speech in Coventry – 08:45 GMT. UK: Bank of England’s Dale to hold speech on conference panel in Oslo – 13:00 GMT. US: Treasury’s Grippo to hold speech on selection of financial agents in Atlanta – 13:30 GMT.



Country GMT Release DB

Expected Actual Consensus Previous Monday, 15 June

SWITZERLAND 07:15 Combined PPI and IPI (May) -0.2% (-3.6%)

EUROLAND 09:00 Employment (Q1) -0.3% (0.0%)

US 12:30 NY fed empire state survey (Jun) -5.5 -6.0 -4.6

US 13:00 Net foreign sec purchase (Apr) USD55.8bn

US 17:00 NAHB housing market index (Jun) 16.0 17.0 16.0

Events and Meetings: CANADA: Bank of Canada to publish Financial system review – 14:30 GMT. EUROLAND: ECB’s Tumpell-Gugerell to hold speech in Rome – 07:15 GMT. EUROLAND: ECB’s Tumpell-Gugerell and Nowotny to hold speech in Vienna – 17:00 GMT.US: Fed’s Evans to hold speech in Chicago – 13:30 GMT. JAPAN: Bank of Japan to hold two day monetary policy board meeting.

Tuesday, 16 June

JAPAN 03:00 BOJ target rate (Jun) 0.1% 0.1%

ITALY 08:00 HICP (May) 0.6% (1.2%)

UK 08:30 CPI (May) 0.2% (1.9%) 0.2% (2.3%)

UK 08:30 Core CPI (May) (1.5%)

UK 08:30 RPI (May) 0.1% (-1.5%) 0.1% (-1.2%)

UK 08:30 RPIX (May) (1.3%) (1.7%)

GERMANY 09:00 ZEW survey (econ. sentiment) (Jun) 31.1

EUROLAND 09:00 HICP (May) 0.0% (0.0%) 0.4% (0.6%)

EUROLAND 09:00 Core HICP (May) (1.5%) (1.8%)

EUROLAND 09:00 ZEW survey (econ. sentiment) (Jun) 28.5

EUROLAND 09:00 Labour costs (Q1) (3.8%)

US 12:30 Building permits (May) 490.0k 500.0k 498.0k

US 12:30 Housing starts (May) 465.0k 480.0k 458.0k

US 12:30 PPI (May) 0.5% 0.6% 0.3% (-3.7%)

US 12:30 Core PPI (May) 0.1% 0.1% 0.1% (3.4%)

US 13:15 Capacity utilization (May) 69.0% 68.5% 69.1%

US 13:15 Industrial production (May) -0.2% -0.7% -0.5% (-12.5%) Events and meetings: EUROLAND: ECB’s Mersch to present annual report in Luxembourg. AUSTRALIA: Reserve Bank of Australia to release minutes of its June monetary policy meeting – 01:30 GMT. JAPAN: Bank of Japan to announce interest rate decision – 03:00 GMT.

Wednesday, 17 June

UK 08:30 Unemployment rate (May) 4.9% 4.7%

UK 08:30 Claimant count change (May) 60.0k 57.1k

UK 08:30 Avg earnings inc bonus (Apr) (0.2%) (-0.4%)

UK 08:30 ILO unemployment change (Apr) 250.0k 244.0k

EUROLAND 09:00 Trade balance (Apr) -EUR2.1bn

EUROLAND 09:00 Construction output (Apr) -1.0% (-8.7%)

US 12:30 Core CPI (May) 0.1% 0.1% (1.8%) 0.3% (1.9%)

US 12:30 CPI (May) 0.2% 0.3% (-0.9%) 0.0% (-0.7%)

US 12:30 BoP (Q1) -USD130.0bn -USD85.0bn -USD132.8bn Events and meetings: EUROLAND: EU’s Kroes to hold speech at Energy Institute in London. JAPAN: Bank of Japan to publish its monthly report – 05:00 GMT. NORWAY: Norges Bank to publish its monetary policy report - 12:00 GMT, to announce interest rate decision at 12:00 GMT; news conference to follow at 12:45 GMT. US: Fed’’s Bernanke to hold speech at Financial literacy summit in Washington – 16:00 GMT. UK: Bank of England to publish minutes of its June 3-4 monetary policy committee meeting – 08:30 GMT. Source: Australian Bureau of Statistics; Bank of Canada; Bank of Japan; BEA; BLS; Bundesbank; Bureau of Labor Statistics, U.S. Department of Labor; Cabinet Office, Government of Japan; ECB; Eurostat; Indian Central Statistical Organization; INE; INSEE; ISTAT; ISTAT.IT; Ministry of Finance japan; National Association of Realtors; National Bureau of Statistics; National Statistics Office; OECD - Composite Leading Indicator; People's Bank of China; Reserve Bank of Australia; Reserve Bank of New Zealand; Statistics Canada; Statistics Netherlands; Statistics of New Zealand; U.S. Census Bureau; U.S. Department of Labor, Employment & Training Administration; U.S. Department of the Treasury; U.S. Federal Reserve Note: Unless otherwise indicated, numbers without parenthesis are either % month-on-month or % quarter-on-quarter, depending on the frequency of release, while numbers in parenthesis are % year-on-year. * on the release time means indicative release time. * on indicator name means indicative/earliest release date.



Financial Forecasts US Jpn Euro UK Swe* Swiss* Can* Aus* NZ*

3M Interest Actual 0.65 0.57 1.28 1.26 0.50 0.25 0.25 3.00 2.50 Rates1 Jun09 1.25 0.70 1.40 1.25 0.50 0.25 0.25 3.00 2.50

DB forecasts futures 0.69 0.56 1.32 1.24 --- --- --- --- --- & Futures Sep09 1.00 0.70 1.30 1.20 0.50 0.25 0.25 2.75 2.50

futures 0.88 0.50 1.32 1.33 --- --- --- --- --- Mar10 1.00 0.70 1.20 1.30 0.50 0.25 0.25 2.50 2.50 futures 1.74 0.51 1.77 2.07 --- --- --- --- ---

10Y Gov’t2 Actual 3.86 1.53 3.68 3.87 3.74 2.47 3.52 5.62 6.05Bond Jun09 3.75 1.40 3.50 3.80 3.50 2.75 3.00 4.25 4.50

Yields/ forwards 3.98 1.57 3.77 3.98 3.85 2.56 3.66 5.86 5.33Spreads3 Sep09 3.50 1.40 3.25 3.90 3.25 2.50 2.75 4.00 4.50

DB forecasts forwards 4.07 1.61 3.86 4.07 3.95 2.65 3.80 5.98 5.46& Forwards Mar10 3.50 1.30 3.00 4.20 3.00 2.25 2.75 4.00 4.50

forwards 4.22 1.66 4.03 4.25 4.15 2.83 4.06 6.21 5.71

EUR/

USD

USD/

JPY

EUR/

GBP

GBP/

USD

EUR/

SEK

EUR/

CHF

CAD/

USD

AUD/

USD

NZD/

USDExchange Actual 1.39 97.9 0.87 1.60 10.90 1.52 1.12 0.79 0.62

3M 1.27 102.0 0.91 1.39 10.16 1.54 1.21 0.66 0.55 6M 1.22 104.3 0.92 1.32 9.85 1.55 1.28 0.67 0.56 12M 1.18 102.9 0.85 1.38 9.54 1.56 1.26 0.68 0.56

(1) Future rates calculated from the June, September and March 3M contracts. Forecasts are for the same dates. * indicates policy interest rates. (2) Forecasts in this table are produced by the regional fixed income strategists. Forwards estimated from the asset swap curve for 2Y and 10Y yields. Sources: Bloomberg, Deutsche Bank. Revised forecasts in bold type. All current rates taken as at Tuesday 11:00 GMT.

US 10Y rates

1.0

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6.0

1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010-1.00.01.02.0

3.04.05.0

10Y2Y/10Y spread (rhs)

US government bond yields,


Japan 10Y rates

0.5

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1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/20100.0

1.0

2.0


Japan government bond yields, %

Source DB Global Markets Research

Euroland 10Y rates

1.0

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6.0

1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010-0.50.00.51.01.52.02.5


Euro government bond yields, %


UK 10Y rates

2.0

3.0

4.0

5.0

6.0

1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010-1.0-0.50.00.51.01.52.02.53.0


UK government bond yields, %




Main Deutsche Bank Global Economics Publications

Global Dbdaily – European Edition (daily) Dbdaily – Asian Edition (daily) Dbdaily – Pacific Edition (daily)

Global Economics Perspectives (weekly)

The World Outlook (quarterly)

Global Macro Issues (occasional paper series)

Credit impulse: Lessons from the Great Depression (13 March 2009) The impact of credit on growth (19 November 2008) Commodities: Falling off their peak (31 July 2008) How far could US Home Prices Fall? (Oct 5, 2007) Why Hasn’t Homebuilding Employment Dropped? (July 10, 2007) Is Emerging Asia Holding Down US Inflation (Feb 26, 2007) Evolution in Bretton-Woods II: Controlled Reflation as the Path of Least Resistance (Dec 7, 2006) US Trend Employment Growth Has Fallen To 100,000 Per Month (Dec 6, 2006) Understanding MEW and How It Is Spent (Nov 17, 2006) Financial system modernisation and economic growth in Europe: Financial markets as risk

managers for the economy (Oct 27, 2006) Housing and the US Consumer: What Foreign Experience Has to Say (Oct 16, 2006) The Transatlantic Productivity Divide: Reasons and Consequences (Oct 13, 2006)

US US Daily Economic Notes (daily)

US Economics and Strategy Weekly (weekly) US Housing Watch Monthly (monthly)

Europe Europe Inflation Report (weekly) Focus Europe (weekly)

Japan Japan Economics Weekly (weekly) Emerging Markets Emerging Markets Daily – European Edition (daily) Emerging Markets Daily – Asian Edition (daily) Emerging Markets Daily – US Edition (daily) EMEA & LatAm Event Radar (weekly) EMEA & LatAm Monetary Policy Rate Calls (bi-weekly) Emerging Markets Monthly (monthly)

EMEA & LatAm Balance of Payment Monitor (quarterly) Emerging Markets Special Publications (occasional series)

Dollar Bloc Dollar Bloc Weekly (weekly) Australian Economics Monthly (monthly)

Asia Asia Economics Daily (daily) Asia Economics Monthly (monthly) Real Exchange Rate Monitor (monthly)



Appendix 1 Important Disclosures

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Deutsche Bank debt rating key

CreditBuy (“C-B”): The total return of the Reference Credit Instrument (bond or CDS) is expected to outper-form the credit spread of bonds / CDS of other issuers operating in similar sectors or rating categories over the next six months. CreditHold (“C-H”): The credit spread of the Refer-ence Credit Instrument (bond or CDS) is expected to perform in line with the credit spread of bonds / CDS of other issuers operating in similar sectors or rating categories over the next six months. CreditSell (“C-S”): The credit spread of the Reference Credit Instrument (bond or CDS) is expected to under-perform the credit spread of bonds / CDS of other is-suers operating in similar sectors or rating categories over the next six months. CreditNoRec (“C-NR”): We have not assigned a rec-ommendation to this issuer. Any references to valua-tion are based on an issuer’s credit rating. Reference Credit Instrument (“RCI”): The Reference Credit Instrument for each issuer is selected by the analyst as the most appropriate valuation benchmark (whether bonds or Credit Default Swaps) and is de-tailed in this report. Recommendations on other credit instruments of an issuer may differ from the recom-mendation on the Reference Credit Instrument based on an assessment of value relative to the Reference Credit Instrument which might take into account other factors such as differing covenant language, coupon steps, liquidity and maturity. The Reference Credit In-strument is subject to change, at the discretion of the analyst.



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GRCM2009PROD015836

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