Market overview: Higher interest rates for everyone, price gains for a few

Another weak month: yields on ten-year government bonds continued to rise worldwide.

Indexed performance of government bonds in local currency

100 = 01.01.2026

The value of government bonds fell again over the course of the month. In Europe, as in the previous month, higher oil prices led to rising inflation expectations, which weighed on the bond markets. Positive news from the Middle East has now eased the situation, however, and oil prices fell mid-month after oil transport through the Strait of Hormuz increased again. As a result, yields also fell from their annual highs, allowing bonds to rise again temporarily. The recovery proved to be short-lived in the USA, though, where higher real interest rates remain a major burden on the bond markets.

Trend in ten-year yields to maturity

In percent

Yields on ten-year government bonds rose again last month. The yield on ten-year US government bonds rose to 5.3 percent, their highest level since 2002. On an annual basis, this resulted in an increase of more than 100 basis points. The increase is primarily due to higher real interest rates and reflects the robust US economy and growing competition for capital. Yields also rose sharply again in Germany and Switzerland.

Credit spreads on corporate bonds

In percentage points

The rapid rise in yields on government bonds has not yet translated into higher credit spreads on corporate bonds. Compared with other countries, these remain at a historically low level. Only the eurozone recorded a slight increase in credit spreads this year, albeit still at a low level there. There was a slight increase in the risk premium on US corporate bonds with very low creditworthiness over the past half-month, but this has not yet taken hold among companies with better creditworthiness.

The regional differences on the equity markets were significant over the course of the month. The divergence between Europe and the USA was particularly pronounced: while the value of the European equity markets fell by just under 5 percent in Swiss-franc terms, the value of the US markets rose by more than 4 percent.

Indexed stock market performance in Swiss francs

100 = 01.01.2026

Stock markets performed unevenly last month. After a broad-based equity market rally in the first half of the year, price gains have again been concentrated more heavily on individual markets and sectors recently. The US equity markets in particular once again benefited from the ongoing AI boom. The latest quarterly figures from chip manufacturer Micron were a major contributory factor. The company exceeded expectations in terms of both revenue and profit, underlining the continued high demand for AI chips. From a Swiss perspective, however, the month was less encouraging. The heavyweights of the Swiss equity market barely held their ground recently, causing the SMI to decline by over 2.5 percent over the course of the month.

Momentum of individual markets

In percent

Last month, all equity markets displayed positive momentum, but lately this picture has changed significantly. It is striking that positive momentum is once again particularly evident on the equity markets where technology companies are heavily represented. By contrast, the French equity market is currently recording significant negative momentum. This was mainly due to the ongoing discussions on the French national budget and the associated political uncertainty. 

Price/earnings ratio

This month, high profits and positive quarterly results again led to a slight decline in the price/earnings (P/E) ratio of global equities. In Switzerland alone, this may have been due to the decline in equity prices, as the decline in the Swiss P/E ratio is roughly in line with the decline in the equity market. Overall, P/E ratios are around 10 to 20 percent below the annual highs.

The prices of exchange-listed Swiss real estate funds recovered slightly last month, although annual returns are still well below those of the equity markets. 

Indexed performance of Swiss real estate funds

100 = 01.01.2026

The prices of exchange-listed Swiss real estate funds have generally trended sideways, as they have done since the start of the year. In the middle of the month, the rise in Swiss capital market interest rates to their highest level of the year temporarily led to a slight correction, although prices recovered quickly after the subsequent fall in interest rates. Despite the slight recovery over the course of the month, annual returns remain just in negative territory at –0.2 percent.

Premium on Swiss real estate funds and ten-year yields to maturity

In percent

The subdued price performance of real estate funds and the rise in capital market interest rates mean that the valuations of exchange-listed Swiss real estate funds have recently fallen slightly. The premium, i.e. the fee incurred on the net asset value, fell again slightly last month, although valuations remain above their long-term average. In addition, further interest rate hikes by the Swiss National Bank could reduce the relative attractiveness of the distribution yields of real estate funds, which have been solid to date. 

Vacancy rate and real estate prices

100 = January 2000 (left) and in percent (right)

Swiss real estate prices were more consistent in the second quarter than in the first. After a slight decline in the previous quarter, the prices of single-family homes rose again. Prices for owner-occupied apartments and rental properties also rose to a similar extent. On an annual basis, owner-occupied apartments posted the strongest increase, rising by almost 3 percent, while the growth in single-family homes and rental properties was also solid, at just over 1 percent. The persistently low vacancy rate is a major reason for rising prices and is now at its lowest level since the financial crisis.

Find out more in our interest rate forecast for mortgages.

Currencies

The Swiss franc rose slightly against the euro, but it lost further ground against the US dollar, which has seen its value rise by almost 5 percent against the Swiss franc since the start of the year.

^{Source:  Communify Ltd}

The most striking movement on the foreign exchange markets last month was the euro against the US dollar. After remaining within a narrow range for most of the year, the US dollar appreciated by more than 3 percent over the course of the month. The euro also fell sharply against the Swiss franc after its strong appreciation up to the end of September. Before this latest correction, the euro was overvalued against the Swiss franc in terms of purchasing power parity. On an annual basis, however, the movement remains very slight, with the euro almost unchanged against the Swiss franc. 

^{Source: Communify Ltd, Coin Metrics Inc}

Gold

Gold continues to struggle against a strong US dollar and rising real interest rates. Annual returns in Swiss francs are now only slightly in positive territory. 

Indexed performance of gold in Swiss francs

100 = 01.01.2026

The value of gold fell again last month. This is mainly due to rising real interest rates, since gold does not generate any interest. The higher the interest rates after deduction of inflation, the more revenue is lost by investors holding gold, and the less attractive the precious metal becomes. In US dollars, annual returns are now negative. For Swiss investors, the decline was somewhat milder because the US dollar strengthened against the Swiss franc. In Swiss francs, the annual return of 0.4 percent remains only just positive, but the gold price is almost 20 percent below its previous high for the year.