After a brief lull, the bond markets have come under pressure again since June. This is likely mainly due to concerns over a more restrictive monetary policy.
Market overview: Headwinds for financial markets
The financial markets are under greater pressure again. While growing concerns over inflation and the prospect of a more restrictive monetary policy caused interest rates to rise, the vulnerability of the AI rally also became apparent. Price gains were concentrated in a small number of tech companies, which meant even minor disappointments were enough to trigger price declines.
Indexed performance of government bonds in local currency
100 = 01.01.2026
After the recovery between mid-May and early June, the markets came under renewed pressure recently. This was likely due to the renewed rise in inflation concerns. Inflation now stands at over 3 percent again in the eurozone, while it has climbed to 4.2 percent in the USA. At the same time, there are growing signs that inflationary pressure is not solely attributable to higher energy prices, but remains broadly based. These fears were compounded in particular by the robust US labour-market report released in early June. This suggests the economy remains resilient and has reinforced expectations that the US Federal Reserve will keep its restrictive monetary policy in place for longer or even tighten it further. As a result, interest rates have risen sharply again. These developments show that monetary policy and the fight against inflation are attracting renewed attention from the financial markets.
Trend in 10-year yields to maturity
In percent
10-year yields to maturity remained virtually unchanged month-on-month. In the meantime, the markets had hoped for an easing of the conflict in the Middle East, which led to a significant fall in long-term interest rates until the end of May. In most industrial nations, the core rate has risen once again alongside the overall rate. Inflation expectations among US consumers have also surged recently. Against this backdrop, long-term interest rates rose again at the beginning of June and now stand at a similar level to a month ago.
Credit spreads on corporate bonds
In percentage points
Credit premiums on corporate bonds fell again over the course of the month and are now lower than before the Middle East conflict began, which places them at historically low levels. This likely reflects the somewhat more optimistic business sentiment of late and the improved economic outlook. At the same time, the trend shows that investors are currently only demanding small credit spreads on corporate bonds. As a result, the potential for further tightening of credit premiums appears limited, while even a moderate deterioration in the economic environment could lead to a countermove.
The AI rally on the equity markets, which has continued since the end of March, suffered a minor setback recently. In addition to renewed concerns about a more restrictive monetary policy, this development was also likely due to high expectations placed on tech companies and the associated vulnerability to potential disappointments.
Indexed stock market performance in Swiss francs
100 = 01.01.2026
The equity market rally, driven by the AI boom, suffered a setback recently. In addition to renewed concerns over a prolonged restrictive monetary policy, lower-than-expected quarterly figures from some semiconductor companies may have also contributed to this. For example, the chip manufacturer Broadcom disappointed the high market expectations despite continued strong sales figures, causing the value of the share to plummet by over 20 percent at times. Emerging market equity markets outside China were also hit hard. These markets have a high proportion of tech and AI-related companies and had previously benefited disproportionately from the AI-driven rally. By contrast, the less tech-heavy equity markets in Europe and Switzerland were comparatively robust. While prices generally trended sideways month-on-month, the more tech-orientated markets suffered moderate price declines.
Momentum of individual markets
In percent
Momentum on the global equity markets remains positive overall. The sustained strength of markets with a high proportion of AI companies, particularly in South Korea, Taiwan and the Netherlands, is striking. By contrast, European equity markets are performing cautiously. Even the recent setback has done little to change this picture. In light of the annual returns achieved so far, which have stood at well over 30 percent at times, positive momentum looks set to continue for the time being.
Price/earnings ratio
Valuation levels on the equity markets have eased somewhat recently. After making strong gains during the AI-driven equity market rally, price/earnings ratios (P/E ratios) have fallen again due to the recent slowdown. In the USA and emerging markets, this development was also underpinned by robust earnings performance. With earnings growth of almost 28 percent year-on-year, US companies achieved their strongest result since 2021 in the first quarter. Overall, however, the decline in valuations remains narrow-based. The Swiss equity market, whose valuation level has barely changed month-on-month, remains an exception.
The prices of exchange-listed Swiss real estate funds remain under pressure and are currently below their value at the start of the year on an annual basis.
Indexed performance of Swiss real estate funds
100 = 01.01.2026
At the end of May, there was a faint hope of a recovery in exchange-listed Swiss real estate funds. Long-term interest rates fell slightly in Switzerland, boosting real estate funds. However, this recovery was short-lived, and a countermove quickly followed. This meant there was a negative trend of just under 2 percent over the month, which also pushed annual returns into negative territory.
Premium on Swiss real estate funds and 10-year yields to maturity
In percent
The premium that investors pay for exchange-listed Swiss real estate funds compared to the net asset value remains at a high level, despite moderate corrections to real estate fund prices. Both the attractive distribution yield and stable demand for Swiss real estate investments are likely to continue supporting valuations in an environment of low capital market interest rates.
3-month SARON and 10-year yields to maturity
In percent
Yields to maturity on 10-year Swiss government bonds barely changed compared to the previous month and remain slightly above 0.4 percent. Interest rates rose briefly over the course of the month, with government bond yields reaching a maximum of 0.6 percent. Interest rates are currently being heavily influenced by inflation expectations, which in turn are likely to be driven by higher energy prices. In Switzerland, inflation recently remained stable at 0.6 percent, as higher energy prices were offset by a decline in other segments. Given the stable price level, the Swiss National Bank sees no need to take action at this time. Accordingly, in June it decided to leave the key interest rate unchanged at 0 percent.
Find out more in our interest rate forecast for mortgages.
Currencies
Last month was marked by a strong US dollar. The Swiss franc fell against both the euro and the US dollar.
| Currency pair | Price | PPP | Neutral range | Valuation |
|---|---|---|---|---|
| Currency pair EUR/CHF |
Price 0.92 |
PPP 0.87 |
Neutral range 0.80 – 0.94 |
Valuation Euro neutral |
| Currency pair USD/CHF |
Price 0.80 |
PPP 0.74 |
Neutral range 0.64 – 0.83 |
Valuation USD neutral |
| Currency pair GBP/CHF |
Price 1.06 |
PPP 1.10 |
Neutral range 0.96 – 1.24 |
Valuation Pound sterling neutral |
| Currency pair JPY/CHF |
Price 0.50 |
PPP 0.80 |
Neutral range 0.65 – 0.96 |
Valuation Yen undervalued |
| Currency pair SEK/CHF |
Price 8.41 |
PPP 9.41 |
Neutral range 8.41 – 10.40 |
Valuation Krona neutral |
| Currency pair NOK/CHF |
Price 8.41 |
PPP 9.54 |
Neutral range 8.42 – 10.66 |
Valuation Krone undervalued |
| Currency pair EUR/USD |
Price 1.15 |
PPP 1.18 |
Neutral range 1.03 – 1.34 |
Valuation Euro neutral |
| Currency pair USD/JPY |
Price 160.32 |
PPP 91.47 |
Neutral range 68.94 – 114.00 |
Valuation Yen undervalued |
| Currency pair USD/CNY |
Price 6.77 |
PPP 6.38 |
Neutral range 5.86 – 6.90 |
Valuation Renminbi neutral |
Source: Allfunds Tech Solutions
In general, volatility on the foreign exchange markets is very low. Many currency pairs have been trending sideways for some time. However, this does not rule out the possibility of major fluctuations during the month. In fact, the US dollar rose by 3 percent against the Swiss franc over the course of the month. However, the year-on-year change is modest, with the US dollar up just 1 percent against the Swiss franc. The year-on-year change against the euro has also been relatively small so far: the Swiss franc is around 1 percent stronger than at the start of the year.
Cryptocurrencies
| Cryptocurrency | Price | YTD in USD | Annual high | Annual low |
|---|---|---|---|---|
| Cryptocurrency BITCOIN |
Price 63,558 |
YTD in USD -27.36% |
Annual high 96,942 |
Annual low 61,042 |
| Cryptocurrency ETHEREUM |
Price 1,675 |
YTD in USD -43.55% |
Annual high 3,354 |
Annual low 1,569 |
Source: Allfunds Tech Solutions, Coin Metrics Inc
Gold
The precious metal experienced a very weak month again, with a decline of over 10 percent.
Indexed performance of gold in Swiss francs
100 = 01.01.2026
The strong gains made by gold at the start of the year were completely wiped out last month. The gold price fell by around 11 percent measured in Swiss francs, remaining in negative territory on an annual basis. Above all, high capital market rates are likely to be exacerbating the current headwinds for gold, as it is not yielding any real returns. At the same time, current geopolitical risks are largely being overlooked.