Swiss 10-year government bond yields fall to 0.5%, reaching a one-month low

(1) The yield on Switzerland's 10-year government bonds has fallen to 0.5%, marking the lowest level in over a month, supported by safe-haven demand triggered by concerns over Europe's fiscal outlook. (2) In contrast, Switzerland is one of the countries in Europe with the lowest public debt levels; its 2026 budget is expected to remain in surplus, and a significant increase in corporate tax revenues has provided funding for a temporary increase in defense spending. (3) Nevertheless, Swiss Finance Minister Keller-Sutter expressed worries last week about the risks to economic stability posed by rising levels of public debt across Europe. (4) Minutes from the Swiss National Bank meeting show that policymakers believe there is inflationary pressure, but see no signs that it will spread to the overall economy, attributing the uptick in inflation to higher oil prices and a depreciation of the Swiss franc. (5) The Swiss National Bank has kept its policy rate at 0%, with President Schlegel stating that no adjustment is needed at present, as inflation remains stable. (5) Although economists expect rates to remain unchanged until 2027, market pricing indicates a rate hike at the beginning of 2027.