Andréa M Maechler: Financial markets and the impact of negative interest on money and capital markets

Speech by Ms Andréa M Maechler, Member of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 15 December 2016.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I will begin by reviewing the situation on the financial markets, before going on to talk about the impact of negative interest on the money and capital markets. I will finish my presentation with a few comments on the progress that has been made in reforming benchmark interest rates.

Situation on the financial markets

Since the last news conference in June, movements on the financial markets have been heavily influenced by two political events: the unexpected outcome of the Brexit vote in June and the US presidential election in November. Both events generated short-term uncertainty among investors. Nevertheless, positive risk sentiment prevailed overall. Leading equity indices in the US, Japan and Europe have recorded price gains since mid-year (cf. chart 1). In the US, all key indices hit new record highs at the beginning of December. In Switzerland, the SMI, however, lagged behind the general trend: it is currently virtually unchanged from its mid-year level. The reason for this is the index's strong weighting in defensive equities, from the healthcare and consumer goods sector for example. These securities, which tend to benefit less from increasing risk appetite among investors, came under selling pressure as a result of rising interest rates.