e Bonds overview Government bonds - Key points Pranennrioes ie mons . . . . . . short duration neutral long duration ¢ Government bond yields of major developed markets started to rise from their historical lows ahead of Greek elections, in particular with hopes of more Eurozone integration (e.g. Eurobonds or a European USD bank deposit guarantee). The new Greek government has at least eased concerns of an imminent and disorderly Greek exit helping yields in their short term rise. However, further central bank easing, EUR (DE) including the extension of Operation Twist (OT) until end of 2012 by the Fed limited the further upside potential in yields over the coming months. GBP ¢ Our expectations for bond yields over the coming 6 months remain a marginal rise. Despite recent setbacks in global growth, the world economy remains in expansion mode. However, OT will keep longer sPY yields low for longer. Also short-term downside risks to bond yields cannot be excluded; Spain has returned to the spotlight, and challenges in Italy's adjustment programs remain. Given current division CHF among European leaders, the mutualization of debt is unlikely to be resolved soon. ¢ On a relative basis, we prefer German and Swiss bonds, over those in the US and UK, where bond yields cap could rise faster due to a sounder economic outlook. In particularly in the US, the cyclical recovery looks comparatively more robust. BYP ¢ Declining growth momentum, extension of Operation Twist by the Fed and a rising likelihood of a rate cut by the ECB, are likely to keep yields on extraordinary low levels, for the time being. Thus we suggest a aia a neutral duration position at this stage. underweight neutral overweight Corporate and emerging market bonds - Key points Bonds total ¢ We maintain our preference for corporate credit (both investment grade and high yield) as well as emerging market bonds, keeping overweight positions in all three segments. Government ¢ Investment grade (IG) corporate bon