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16 Management Report – münchener Hypothekenbank eg l annual Report 2011 these securities remained comparatively tight in contrast to spreads noted for covered bonds originating in Great Britain and in countries on the periphery of Europe, as their spreads widened substantially in some cases. Nevertheless, the debt crisis also affected the issuing activities of Pfandbriefe as of the second half of 2011, with Public Pfandbriefe, in parti- cular, retreating. Despite the good start, the volume of new issues fell to € 70 billion last year. In November 2011 the ECB launched a new covered bond purchasing program for an intended amount of € 40 billion for the purpose of stabilising the markets. The development of long-term interest rates was primarily influenced by economic perspectives. The continuing up- swing led to rising yields for 10-year German government bonds (Bunds), especially in the first half of the year, when they hit their peak yield of 3.5 percent in April. Returns also declined as the economic outlook worsened. Yields stood at 1.7 percent at the end of the year. The sovereign debt crisis played a substantial role in driving yields down as investors viewed Bunds as a particularly safe place to put their money and demand rose correspondingly. Property and property financing markets Residential property – Germany Strong demand for residential property remained undiminished in 2011 and was also driven by the uncertainty surrounding the future of Europe and its currency union, as well as by a lack of investment alternatives. Safe investments offering reasonable returns, like those offered by German residential property, in particular, were very sought after by professional investors and private individuals. The ongoing attractive level of interest rates had a favourable effect on the demand for property and property loans. Fol- lowing an initial rise in interest rates, the interest rate for ten- year property loans fell to a historic low of less than 3 percent in 2011. Even conditions for long-term, fixed rate loans with maturities of up to 30 years were extremely attractive and during the fall of 2011 stood at only about 3.5 percent at times. In addition, the stable development noted in the labour market coupled with higher wages strengthened potential private home- owners’ ability to afford and finance residential property. Source: German Association of Pfandbrief Banks 112 110 108 106 104 102 100 98 Development of property prices in germany (year 2003 = 100) 2004 2005 2006 2007 2008 2009 2010 20112003 Owner-occupied residential property houses condominiums