Switzerland’s 10-year government bond yield remained below 0.4%, pulling back from May’s peak of 0.6%, after weaker-than-expected inflation data reduced the likelihood of an interest rate hike by the Swiss National Bank. Annual inflation in May was unchanged at 0.6% — the highest since December 2024 but still below the 0.8% consensus forecast. After starting the year close to zero, inflation picked up following late-February strikes on Iran. Switzerland’s energy mix, which leans heavily on Alpine hydropower and nuclear power rather than oil and gas, has helped shield it more than the euro area from energy-driven price pressures. SNB Chairman Martin Schlegel noted that, despite the recent uptick in inflation, medium-term inflation pressures remain contained. Markets now expect the central bank to keep its policy rate at 0% through 2026.
In the geopolitical backdrop, investors continued to monitor tensions in the Middle East: Iran reported an attack on a US command ship in the Gulf of Oman, the Republican-controlled House of Representatives voted to end US military operations against Iran, and Israel and Lebanon agreed to a conditional ceasefire.
