In this situation, most stock market indices have registered gains since the beginning of the year. Indeed, a number of indices, such as Switzerland’s SPI, the US S&P 500 and Germany’s DAX, have attained record levels in recent weeks. Meanwhile, demand for sovereign bonds issued by euro area peripheral countries was high. This was attributable, first to a gradual improvement in fundamental data, but also to the fact that investors were anticipating the monetary policy easing measures introduced by the European Central Bank at the beginning of June. Consequently, risk premia against German sovereign bonds declined again significantly. They are currently at levels last seen in 2010, before the onset of the sovereign debt crisis. Sovereign bonds issued by emerging economies also benefited from investors’ increasing risk appetite. Despite the uncertainty at the beginning of the year which I mentioned before, their risk premia are now lower than at the end of 2013, apart from a very few exceptions. Alongside sinking risk premia, volatility on financial markets has also decreased since the beginning of the year. Chart 1 shows the standard volatility measures for US equities (VIX), US government bonds (MOVE) and foreign exchange markets (Global FX), all of which are derived from option prices. To ensure comparability, the individual data series have been normalised. They show how many standard deviations above or below their long-term average the figures are situated. In addition, the troughs since 2000 have been indicated at the right-hand edge of the chart.

In trade-weighted terms, the Swiss franc is currently almost unchanged from January. Structural changes in the foreign exchange and money markets As you will know, the Swiss National Bank (SNB) implements its monetary policy via the money and foreign exchange markets. Consequently, structural changes in these markets are particularly important to us. I would now like to talk briefly about the major changes and their significance for our work. On the foreign exchange market, we are seeing a substantial decline in turnover in the primary interbank market. Meanwhile, the size of the market as a whole has decreased only slightly. This means that the interbank market has lost market share. The primary interbank market covers trading via the electronic communication networks. Between 2010 and 2013, turnover through these networks fell by almost 40% overall. In chart 3 you can see an example of this decline in turnover for the EURCHF and USDCHF currency pairs. In 2013, this was already below the previous levels, and a further decline in turnover is becoming evident for the current year. This development is attributable, in essence, to three factors. First, there is an increasing tendency for large merchant banks to use internal clearing for customer transactions. This means that the need for hedging transactions on the interbank market has declined. Second, to an increasing extent, merchant banks are offering liquidity via other electronic distribution channels such as their own trading platforms or multibank platforms. This enables them to attract more business and to benefit from the additional internalisation.