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Responses of Swiss bond yields and stock prices to ECB policy surprises

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  • Dr. Thomas Nitschka
  • Diego M. Hager

Abstract

We analyse spillovers from European Central Bank (ECB) policy surprises to asset markets outside the euro area using Switzerland as a case study. Our results suggest that Swiss asset price responses to ECB policy surprises are significant. They depend on the type and nature of the surprise and change over time. Decomposing bond yields into expected short-term interest rates and the term premium reveals that both signalling and portfolio rebalancing effects explain the responses of bond yields of various maturities to surprises resulting from scheduled ECB policy decisions. ECB policy surprises are more important to Swiss government bond yields than Swiss stock prices.

Suggested Citation

  • Dr. Thomas Nitschka & Diego M. Hager, 2022. "Responses of Swiss bond yields and stock prices to ECB policy surprises," Working Papers 2022-08, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2022-08
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2022/working_paper_2022_08
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    More about this item

    Keywords

    Bond; event study; international spillovers; monetary policy; stock;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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