previous high point, at the end of 1995, was only 12 % above the same long - term average. since the introduction of the euro in 1999, the volatility of the eur / chf exchange rate has averaged approximately 5 %. 3 in august it rose to almost 30 %. as chart 1 shows, three of the largest ever daily negative movements in the eur / chf exchange rate also occurred in this period. since the introduction of the minimum exchange the markit itraxx europe index, for example, which is composed of 125 investment grade entities from six sectors ( auto, consumer, energy, financial, industrial and tmt ), more than doubled between july and september. likewise, the itraxx sovereign western europe index, consisting of 15 sovereign cds across europe, rose by approximately 70 % in the same period. this is an approximation of the real effective exchange rate, assuming constant weights and inflation differentials. annualised volatility computed over one calendar month on the basis of daily movements. bis central bankers ’ speeches rate on 6 september, eur / chf volatility has fallen below 10 %, though it remains high from a historical perspective. the introduction of the minimum exchange rate also had an impact on some of the dynamic properties of the swiss franc. as the red bar on the left side of chart 2 suggests, there was previously a positive correlation between the movements of the swiss franc and those of risk indicators such as the vix index, i. e. investors tend to buy swiss francs when perceived risk increases. in the same vein, the blue bar on the left of the chart shows that the correlation between the movements of the swiss franc and those of risky assets, such as the equity shares on the msci world index, has historically been negative. in other words, negative market developments have often been accompanied by a rising swiss franc. intriguingly, as the right side of chart 2 shows, the introduction of the minimum exchange rate appears to have had a significant impact on these correlations. the snb ’ s implementation of monetary policy : liquidity measures on 3 august, the snb started to implement liquidity measures against the massively overvalued swiss franc. let me provide some further information on these operations. that day, the snb announced that it was narrowing the target range for the three - month libor from 0. 00 – 0. 75 % to 0. 00 – 0. 25

. also borio and disyatat ( 2011 ). bis central bankers ’ speeches basic argument is that, as macroeconomic volatility decreased, investors became increasingly willing to accept lower term and inflation risk premia on their investments, which could translate into a decrease in observed interest rates. whatever the precise explanation may be, the downward progression of long - term nominal and real interest rates over the last twenty years has been conspicuous. let us now focus on more recent developments. recent developments the financial crisis and the global economic decline we have observed subsequently have both added cyclical pressure to this long - run trend. low or negative output growth and dampened expectations of future growth naturally have a negative impact on long - term rates. in addition, the central banks of most mature economies have, of course, responded to the deteriorating economic situation, first by pushing short - term rates towards appropriately low levels and subsequently by exerting pressure on longer - term rates. as slide 6 illustrates, the first “ conventional ” monetary policy response was to bring short - term target interest rates to levels as close to zero as possible. however, confronted with the zero lower bound – that is, the impossibility of using conventional monetary policy to do more – many central banks have supplemented their traditional policies with “ unconventional ” measures, often in order to impact long - term rates. central banks do so by altering the composition of their balance sheets ( credit easing ), or by expanding the balance sheet, i. e. by increasing liquidity via one form or another of asset purchasing ( quantitative easing, qe ) ( slide 7 ). there is evidence to suggest that these measures are having an impact on private sector borrowing costs. often as intended, its effect has varied from one asset to the next. in the case of the bank of england, the vast majority of assets purchased were gilts, and, analysis so far indicates that, gilt yields were some 100 basis points lower than they would have been without qe purchases ( slide 8 ). 5 several us - centred studies6 also estimate that qe measures had a similar effect there. a study by the federal reserve bank of new york estimates, for example, that the measures reduced the ten - year term premium on us treasuries by “ somewhere between 30 and 100 basis points. ” the findings also indicate that the effect of the asset purchasing on agency debt and agency mortgage - backed securities was even more significant. 7 in addition, a recent internal