Surprise ECB rate hikes have a greater effect on Swiss sovereign bond yields than on Swiss stock prices, a working paper published by the SNB Wednesday argues. Unexpected tightening changes exert greater influence over Swiss bond yields via portfolio rebalancing than expansionary surprises, they conclude.
But the paper raises questions over how the relationship will develop now that the ECB has exited negative interest rates.
“Spillovers depend on the type as well as on the nature (restrictive or expansionary) of the monetary policy surprise,” the authors write. “In addition, the importance of the different types of ECB policy surprises varies over time. For example, the lowering of the ECB policy rate into negative territory and the advent of QE seems to have diminished the effect of the ECB’s forward guidance on Swiss asset prices.”