Swiss Bond Yield Eases Further

The yield on the Swiss 10-year government bond declined to 0.52%, retreating from multi-month highs of 0.61% reached in mid-September, as the global bond sell-off paused following the Fed’s first interest-rate hike since 2023. In Switzerland, a Swiss Bankers Association survey showed that all respondents expect the SNB to keep its policy rate at 0% through the end of the year, as the impact of higher energy prices remains limited. Markets are pricing in the first rate hike for June 2027, while most economists expect the first increase in early 2028. Safe-haven demand has also provided support to the Swiss bond market. Meanwhile, the State Secretariat for Economic Affairs raised its forecast for economic growth in 2026 to 1.7%, up from its June projection of 0.9% and broadly in line with the OECD’s latest forecast of 2%.

Switzerland’s 10-year government bond yield eased to around 0.58% after reaching its highest level since March 2025, as the OECD raised its economic growth forecast. The OECD stressed the need for tax and pension reforms, as the country’s aging population and growing geopolitical challenges are expected to create long-term spending pressures. Still, the organization raised its economic growth forecast to 2% from 1.1%, following a strong performance in the second quarter that reached 1.5%, its highest level in five years, driven by a weaker Swiss franc that supported exporters. Safe-haven demand also provided support amid rising oil prices and heightened economic uncertainty. On the monetary policy front, a Swiss Bankers Association survey showed that all bankers expect the SNB to keep its policy rate at 0% by year-end, as the impact of higher energy prices remains limited. Markets anticipate the first rate hike in June 2027, while most economists expect the first hike in early 2028.

Switzerland's 10-year government bond yield rose to around 0.6%, reaching its highest level since March of 2025, as global oil prices continue to rise amid disruptions to the energy supply chain, which further lift concerns over inflation and its impact on monetary policy across major economies. Domestically, Swiss inflation doubled to 0.8% in August, although remaining well within the SNB’s target and highlighting the limited pass through of higher global oil prices. Electricity prices are also set to decline around 4% next year, according to the Swiss Federal Electricity Commission, as local utility companies pass on lower wholesale costs to consumers. On the monetary policy front, a Swiss Bankers Association survey showed that all bankers expect the SNB to keep its policy rate at 0% by year-end. Markets anticipated the first rate hike in June 2027, while most economists expect the first hike in early 2028.