On January 15, the SNB decided to discontinue the minimum exchange rate to EUR and at the same time lower interest-rates on sight deposit account balances to -0.75%. This decision led to a further decline in overall CHF bond yields as well as a significant increase in foreign exchange risk for investments denominated in other currencies. As a consequence the environment for bond investments of a Swiss/Liechtenstein based investor has become even more challenging.
We consequently discuss the influence of this decision on our investment outlook for different asset classes. Particular focus is put on the yield potential of bond in-vestments based on different benchmark definitions. Additionally, we look into the effects and determinants for liquidity positions and foreign exchange hedging.