SNB move: Swiss 10 year bond yield drops to negative territory

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Yields on 10 year Swiss bonds have dropped into negative territory, following the announcement of the Swiss National Bank (SNB) to scrap the fixed exchange rate between euro and franc and to cut interest rates to -0.75%.

The yield fell to -0.003%, according to Bloomberg data, it is the first time that 10 year bond yields of a developed economy government have turned negative, effectively forcing investors to pay for lending over a ten year period.

Christina Böck, CIO Switzerland at AXA IM comments on the long term implications for asset allocation: The SNB’s move certainly lowers the general level of returns in all asset classes – but it increases the relative attractiveness of real assets like equities (Swiss and foreign) and real estate which have a new potential to appreciate now in light of this new factor.”

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