monetary policy easing measures, the single currency came under downward pressure. by the beginning of december, the expectations of financial market participants had not been fulfilled and the euro gained in value again. by comparison with its mid - year level, the euro has appreciated only marginally on a trade - weighted basis. demand for secure investments remained high worldwide. on the bond markets, yields on longer - term government bonds declined further. chart 1 shows that the decline in yields in the euro area was somewhat greater than in the us. the yields on ten - year german government bonds have fallen by almost 20 basis points since the end of june. in france and italy, the decline in yields was more pronounced. meanwhile, yields on ten - year us treasury bonds have changed relatively little. on the swiss capital market, almost the entire yield curve has shifted downwards again since mid - year. yields on confederation bonds with terms of up to 13 years are currently in negative territory. this corresponds to three - quarters of the outstanding volume. at the beginning of december, the yield on ten - year confederation bonds reached a new low of – 0. 4 %. most recently, it was trading at – 0. 25 % or about 40 basis points lower than mid - year. bis central bankers ’ speeches how negative interest works in the second part of my remarks today, i will talk about the way in which negative interest works. since january, the swiss national bank ( snb ) has been charging negative interest of – 0. 75 % on sight deposits held by banks and other financial market participants at the snb. negative interest is a key instrument in our monetary policy. together with our willingness to intervene on the foreign exchange market, it counteracts the overvaluation of the swiss franc. when calculating negative interest, the snb grants the banks exemptions so that the banking system does not have to carry the full burden resulting from the high level of sight deposits. for banks subject to minimum reserve requirements, the exemption threshold is calculated as 20 times the minimum reserve requirement, based on a reference period. for sight deposit account holders not subject to any minimum reserve requirements, the exemption threshold has been set at a minimum of chf 10 million. by applying negative interest universally to all account holders, we are adhering to the principle of equal treatment. it therefore makes sense that banks with above - average sight deposits in proportion to their minimum reserves pay higher interest than other banks. in this respect, negative interest is no different to

andrea m maechler : how negative interest works and changes in the management of foreign exchange reserves speech by ms andrea m maechler, member of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 10 december 2015. * * * accompanying charts can be found at the end of the speech. in my remarks today, i will begin by talking about developments on financial markets since the middle of the year. then i will discuss the way in which negative interest works. i will conclude with a report on changes in the way we manage our currency reserves. situation on the financial markets i will start with the situation on the financial markets. financial market developments since the middle of the year have mainly been shaped by three topics : the uncertainty surrounding the first interest rate move by the federal reserve, monetary policy easing measures by the european central bank ( ecb ) and concerns about growth prospects in the emerging economies, particularly china. in mid - august, disappointing economic data and an unexpected depreciation of the renminbi against the us dollar resulted in a sharp decline in the chinese stock market. the fallout was also felt by stock markets of other emerging and advanced economies in short succession. after volatility on the stock markets had increased sharply at times, investors ’ appetite for risk gradually returned at the end of september. favourable economic data from the us and the euro area contributed to the more positive sentiment. in addition, concerns about growth in china recently slipped into the background again. the stock markets of the advanced economies, which have since been able to partially recoup their losses, were the main beneficiaries of this recovery. by contrast, in the emerging economies, the wave of selling has had a lasting impact. in the most recent period, the msci emerging markets index – calculated in local currency – was still approximately 12 % below its level at the end of june. stronger signals of diverging monetary policy stances between the euro area and the us were also reflected on the foreign exchange markets. on the one hand, the prospect of higher interest rates in the us boosted the us dollar. on the other, it put the currencies of emerging economies under pressure. since mid - year, the us dollar has appreciated by 4. 5 % on a tradeweighted basis. the euro initially gained ground at times as a result of uncertainty in the emerging economies. however, after the ecb had held out the prospect of further