The yield on the Swiss 10-year government bond climbed to 0.54%, its highest level in a week, tracking a broader bond-market selloff fueled by mounting concerns over debt sustainability in other European countries. Persistently elevated energy prices are reinforcing worries about government borrowing and fiscal spending. Even so, Swiss government debt continues to benefit from safe-haven demand.
Inflation in Switzerland rose to a two-year high of 1% in September, driven primarily by higher energy costs amid the ongoing conflict in the Middle East. Nonetheless, it remains comfortably within the Swiss National Bank’s (SNB) 0–2% target range. The SNB left its policy rate unchanged at 0% in September. Vice Chairman Martin said that no rate adjustment is currently warranted, pointing to low and stable inflation, limited spillover risks, and an economy that is functioning “very well.”
Most economists expect the policy rate to stay on hold through 2027. Market pricing, however, suggests a more hawkish path, with investors still anticipating a rate increase by year-end and roughly three hikes by the end of 2027.
