EFTA01458589

Macro outlook A glance at the bond markets The remninbi devaluation, worsening economic dynamics in the emerging markets, falling commodity prices and stock-market volatility were factors leading the Fed to postpone its first rate hike. Moreover, U.S. exports have been hurt by the stronger U.S. dollar. Since current economic growth rates are moderate and the economic recovery may not yet be as well-embedded as desired. the Fed is likely to opt for gentle upward moves in interest rates. Before any interest-rate move, the Fed will closely observe developments in the U S. labor market, the pace of growth and inflation as well as in capital markets. The Fed stressed at its last meeting that the deceleration of growth in emerging markets would be considered when making a decision on interest rates. Thus, it has become more unlikely that rates will increase markedly on the bond markets. Since the debt level as a ratio of GOP is high in the industrialized countries, a significant rise in interest rates would particularly burden governments, but also cause difficulties for corporations and private households and weaken economies. Interest-rate levels are not likely to reach those observed during previous recovery phases. The development of debt £50 -n t of 6.7.1> 41:* untied Slates 350 305 250 200 150 100 60 1 • G000nvnto, Co.0..."62,:::, / • Private housMglds tutekt,"-.4 I I I;t00 20.47 2000 2007 2014 2V.10 2X.t? 2014 Soutott. lionk lot loirnalionolSe3on cons. Tlsotmon Reolots Dorostteon. Etgopeon Co:Iwo:stain. as olZiopleTnhor 20`5 The development of debt in Germany 95 'X. ol 90 /6 70 • ce--reraroer tee inoneal wain) iv Gown:moot 'spat SOON,06.111001t.), , RtOttlb Et:Is:foam. tile-0014381 Comm:ow:A. al, of $4olt,tiort fly Rising public debt In the industrialized countries, governments have markedly raised their debt in relation to GDP. Reasons are higher welfare payments in the wake of the financial crisis and state incentives to boost growth. High indebtedness should limit the rise of interest rates in the developed economies. Receding private-sector debt In Germany, the financial crisis also caused the ratio of government debt to GDP to rise from 2008 onwards, whereas debt ratios for corporations and private households fell. In total, debt in 2014 amounted to roughly 185% of GDP - a low ratio compared to the United States or Japan. Past performance is not indicative of future returns. No assurance can be given that any forecast, investment objectives and/or expected returns will be achieved. Allocations are subject to change without notice. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. CONFIDENTIAL — PURSUANT TO FED. R. GRIM. P. 6(e) CONFIDENTIAL SDNY_GM_00264752 Macro atriookl Atonloo tOrO.-o lectotw 7016 i.A i V: DB-SDNY-0118568 EFTA01458589