##ify their investments, is hence becoming increasingly diverse and competition for german pfandbriefe is intensifying. the market for corporate bonds has been growing strongly in europe but not as strongly as predicted by optimistic forecasts. in the longer term, however, financing via bonds is likely to become a worthwhile alternative for enterprises. the market for corporate bonds might receive an additional boost from the persistent wave of mergers in europe. financing of corporate mergers is often only possible through borrowed funds which are likely to be increasingly financed by the issue of corporate bonds. finally, investors who are looking for new yield and diversification opportunities will possibly step up demand for higher - yielding bonds. there are hence signs that, from a spread point of view, corporate bonds might become the most important investment category competing for investors in the future european bond market alongside government bonds, pfandbriefe and bank bonds. other products, such as asset backed securities or high - yield junk bonds, are also likely to gain in importance. the german pfandbrief market offering high creditworthiness and liquidity as well as high - yield premiums compared with government bonds has good prospects of becoming the most important spread market in the euro area. the example of the us agency market has shown that high market liquidity, representation of the entire yield curve and the transparency of the issuing policy are crucial factors for a successful positioning in the spread market ranking. the german mortgage banks have already successfully tapped this potential over the past few years by a corresponding expansion of their product range and a commensurate marketing strategy. 5. up to the end of last year – as i have already mentioned – the german capital market and its most important products, the federal government bonds and the jumbo pfandbriefe benefited crucially from the stability of the d - mark. in the same way, the development of the european capital market will hinge on the stability of the euro and on international investors ’ confidence in the stability policy of the european central bank. to a certain extent, monetary policy and the capital markets are mutually dependent : the capital market needs a stable currency, since monetary stability is the foundation on which the capital markets can flourish. it encourages savings and makes a crucial contribution to long - term capital formation. it improves the real performance of financial assets and thus makes a flight into material assets superfluous. conversely, efficient, highly competitive and stable financial markets are of great importance for the implementation of monetary policy. it is

mr haferkamp focuses on european capital markets in the first year of emu keynote address given by mr dieter haferkamp, member of the directorate of the deutsche bundesbank, at the conference on “ the pfandbrief : global perspectives for europe ’ s biggest bond market ” in london on 28 september 1999. * * * 1. i am delighted to have been given this opportunity to speak at this now almost traditional pfandbrief conference. keynote speakers at a euromoney conference have the privilege of choosing their own topic. i am not a “ pfandbrief ” specialist. as a representative of the central bank of a country participating in monetary union, i feel more at home making some comments on the monetary and capital market policy environment, which is likely to have a major impact on the development of the european bond markets and thus also on the fate of the pfandbrief. in many ways, the liberalisation of investment services in the european economic area, the creation of electronic markets and the internationalisation of financial portfolios did away with the segmentation of europe ’ s capital markets even in the years prior to monetary union. but then, overnight, the start of european monetary union brought about major structural changes which forced all the market participants to undergo the appropriate processes of adjustment. this applies also, and especially, to the market for pfandbriefe. the german pfandbrief goes back more than 200 years. however, only during the past few years have the international capital markets discovered it. the pfandbrief ’ s success story is attributable to two factors. the pfandbrief has an excellent credit quality, and it firmly embodies the principle of investor protection. admittedly, neither of these advantages would have sufficed by themselves for the pfandbrief to hold its own in intensified european and global competition. it was only the efforts made by german mortgage banks to market these bonds internationally which enabled this traditional german product to achieve a breakthrough in the markets. the most important milestone in these efforts was undoubtedly the introduction of jumbo bonds in may 1995. with the characteristics of the jumbos the pfandbrief was also equipped with the liquidity which globally operating investors expect of today ’ s capital market instruments. and allow me, as a representative of the german central bank, to add that the stability of the d - mark, which was the most