Posted on 01/15/2015 7:42:16 PM PST by Signalman
Jan 15 (Reuters) - All Swiss government bill rates and bond yields out to nine- year maturities traded below zero on Thursday, after the Swiss National Bank stunned markets by scrapping its exchange rate cap on the franc and lowered interest rates to -0.75 percent.
This was unprecedented in modern times, and analysts said it was only a matter of time before the benchmark 10-year yield dropped below zero too.
Swiss rates and yields out to five years had already been trading below zero, but the SNB's bombshell turned the yield on nine-year bonds negative for the first time as well.
"The indicative yield on the June 2024 bond did briefly go below zero today," a spokeswoman for Tradeweb told Reuters.
That yield fell as low as -0.02 percent and the yield on the bond maturing in July 2025 - which Tradeweb will make their 10-year benchmark later on Thursday - fell as low as 0.059 percent.
The yield on the 50-year bond maturing in June 2064 fell as low as 0.548 percent.
Liquidity in Swiss government bond trading is often light because the country has relatively little outstanding debt. It was even lighter on Thursday, because of the massive volatility sparked by the SNB's surprise move.
The central bank's scrapping of the franc's three-year old cap at 1.20 per euro and pushing interest rates even deeper into negative territory stunned observers. Nick Hayek, chief executive of Swiss watch firm Swatch, called it a "tsunami".
(Excerpt) Read more at reuters.com ...
Oh ... wait ...
This does not bode well for the financial markets.
If people are willing to put their money into Swiss bonds, even though they will lose money, because they think it’s safer than anywhere else...look out equity markets.
There is already a thread on this.
It’s been observed more than once that this is 1930, all over again.
Liquidity in Swiss government bond trading is often light because the country has relatively little outstanding debt.
...
We can send them some politicians to take care of that.
Ep 44: Switzerland Loses Currency War - Swiss Win
with Peter Schiff
https://www.youtube.com/watch?v=_JEHDTkUoyo
Just to be clear, a negative interest rate means you have to pay the Swiss Government to take your money.
They won’t just take it for free.
what really surprises me is that a land-locked nation, a tiny standing army, a small Federal government, nearly no Navy and a mere 8 million people is becoming Europe, Russia and the Mid-Easts safe haven for money.
It says two things
1) The rest of the world is really f***ed up, especially the EU
2) A little rule of law, civil society and free market enterprise go a LONG way.
But US Treasury yields have fallen too of late.
That is true for deposits, but that isn’t the way Bond markets work. In the fixed income world it is a negative yield or below par trade, meaning you are paying more for it than it’s face value plus whatever Yield to Maturity. So really you are buying something that you know you will lose money on over time.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.