Bonds are experiencing a weak month, but the reasons for this aren’t the same everywhere.
Market overview: Higher interest rates weigh on financial markets
Financial markets are coming under increasing geopolitical pressure. Rising oil prices and concerns about a prolonged period of restrictive monetary policy are driving up long-term interest rates: 10-year government bond yields in the US and Germany are reaching levels not seen for over a decade. Stock markets fell overall during the month, although robust corporate results helped limit the losses.
Indexed performance of government bonds in local currency
100 = 01.01.2026
Events on the geopolitical stage once again impacted the bond markets this month. Tensions in the Middle East rose sharply again over the course of the month, resulting in an oil price of over 100 US dollars per barrel. This led to higher inflation expectations and capital market interest rates, particularly in Europe. In the USA, interest rates also rose sharply, but this is primarily due to concerns about the budget deficit and tighter monetary policy. The value of government bonds fell overall last month. Swiss government bonds are also back in negative territory on an annualized basis.
Trend in 10-year yields to maturity
In percent
Yields to maturity on 10-year government bonds rose sharply again last month. In the USA, they recently moved close to the key psychological mark of 5 percent – a level not seen since the financial crisis. Yields to maturity also rose sharply in Germany due to higher inflation expectations, and are currently at the same level as in 2011. The yield on Swiss government bonds also rose sharply and, at 0.5 percent, is close to its highest level this year.
Credit spreads on corporate bonds
In percentage points
Credit spreads on corporate bonds remain at historically low levels worldwide. Solid quarterly results, low default rates and improved sentiment in industry are bolstering confidence in companies. Even the extensive volume of new issues by US tech companies has had little impact on the credit market so far. This limits potential for further narrowing, but there’s a greater risk of a downturn if the economy weakens.
Apart from Japan and emerging markets, all equity markets fell in value during the month, measured in Swiss francs.
Indexed stock market performance in Swiss francs
100 = 01.01.2026
Fuelled by a positive reporting season over the summer, equity markets came under pressure from rising interest rates and inflation concerns last month. Switzerland’s leading index, the SMI, showed particular weakness: negative results from several clinical studies weighed on index heavyweight Novartis, causing its share price to fall sharply. The SMI was down by over 5 percent during the month, and annual returns fell back into single-digit territory. By contrast, the tech-heavy equity markets in emerging economies recovered after a weak spell. Swiss investors in Japanese stocks benefited from the yen’s sharp appreciation against the Swiss franc.
Momentum of individual markets
In percent
Momentum on the international equity markets remains positive overall, but it has slowed on average compared to the previous month. Although the reporting season was very positive for many sectors, tech stocks continue to dominate events. This is reflected in momentum, where tech-heavy markets continue to lead.
Price/earnings ratio
Equity prices fell slightly last month, which also led to a slight drop in price/earnings ratios. Although the solid reporting season supported earnings expectations, it was unable to fully offset the pressure on valuations caused by higher capital market interest rates. The upward trend in the P/E ratio remains intact over the year, with global equities in particular still valued well above their long-term average.
The prices of exchange-listed Swiss real estate funds fell slightly again last month.
Indexed performance of Swiss real estate funds
100 = 01.01.2026
Prices of exchange-listed real estate funds came under renewed pressure last month due to higher Swiss capital market interest rates. The year-to-date loss stands at just over 2 percent. After the strong increase in the previous year, the trend for 2026 is much weaker and more volatile.
Premium on Swiss real estate funds and 10-year yields to maturity
In percent
Recent price declines and the rise in capital market interest rates weighed on valuations of exchange-listed Swiss real estate funds to some extent, and the premium paid versus the net asset value declined accordingly. However, valuations remain comparatively high by long-term standards. At the same time, the distribution yield remains attractive in light of low Swiss interest rates and is likely to underpin demand for real estate funds.
3-month SARON and 10-year yields to maturity
100 = January 2000 (left) and in percent (right)
The yield to maturity on 10-year Swiss government bonds is currently just over 0.5 percent, once again close to its annual high after a period of weakness. Swiss inflation rose somewhat unexpectedly from 0.4 to 0.8 percent, with the less volatile core rate also moving higher. Although inflation is unlikely to be a cause for concern for the Swiss National Bank, the SNB could create a little more leeway at the next meeting and move interest rates away from zero.
Find out more in our interest rate forecast for mortgages.
Currencies
The Swiss franc remains weak. In fact, the US dollar rose by over 2 percent against the Swiss franc over the course of the year.
| Currency pair | Price | PPP | Neutral range | Valuation |
|---|---|---|---|---|
| Currency pair EUR/CHF |
Price 0.94 |
PPP 0.86 |
Neutral range 0.79 – 0.92 |
Valuation Euro neutral |
| Currency pair USD/CHF |
Price 0.81 |
PPP 0.69 |
Neutral range 0.60 – 0.78 |
Valuation USD neutral |
| Currency pair GBP/CHF |
Price 1.10 |
PPP 1.08 |
Neutral range 0.94 – 1.22 |
Valuation Pound sterling neutral |
| Currency pair JPY/CHF |
Price 0.52 |
PPP 0.77 |
Neutral range 0.62 – 0.93 |
Valuation Yen undervalued |
| Currency pair SEK/CHF |
Price 8.44 |
PPP 9.27 |
Neutral range 8.29 – 10.25 |
Valuation Krona neutral |
| Currency pair NOK/CHF |
Price 8.74 |
PPP 9.48 |
Neutral range 8.37 – 10.59 |
Valuation Krone undervalued |
| Currency pair EUR/USD |
Price 1.16 |
PPP 1.23 |
Neutral range 1.08 – 1.39 |
Valuation Euro neutral |
| Currency pair USD/JPY |
Price 154.37 |
PPP 89.83 |
Neutral range 67.19 – 112.46 |
Valuation Yen undervalued |
| Currency pair USD/CNY |
Price 6.71 |
PPP 6.31 |
Neutral range 5.81 – 6.81 |
Valuation Renminbi neutral |
Source: Communify AG
Both the euro and the US dollar made gains against the Swiss franc last month, with the euro reaching its highest level against the Swiss currency in a year. The main mover on the foreign exchange market was the Japanese yen, which gained over 4 percent against the Swiss franc. Although the coordinated intervention by the USA and Japan initially had only a limited impact, the yen appreciated significantly within a few days in early September.
Cryptocurrencies
| Cryptocurrency | Price | YTD in USD | Annual high | Annual low |
|---|---|---|---|---|
| Cryptocurrency BITCOIN |
Price 76,529 |
YTD in USD -12.53% |
Annual high 96,942 |
Annual low 58,526 |
| Cryptocurrency ETHEREUM |
Price 2,443 |
YTD in USD –17.70% |
Annual high 3,354 |
Annual low 1,569 |
Source: Communify Ltd, Coin Metrics Inc
Gold
Gold had recently shown signs of life and made strong gains. However, there’s not much left over from this recovery after a weak month.
Indexed performance of gold in Swiss francs
100 = 01.01.2026
After a strong August, gold prices got off to a weak start in September. In August, the gold price was supported amid concerns over the US Treasury’s possible intervention in the bond market. However, higher interest rates and the strong dollar saw the precious metal decline during the course of the month. Higher interest rates make gold less attractive as a non-interest-bearing asset class. With a monthly loss of just over 1 percent, annual profit in Swiss francs now stands at just over 2 percent.