fritz zurbrugg : a snapshot of the financial situation in switzerland introductory remarks by mr fritz zurbrugg, member of the governing board of the swiss national bank, at the media news conference of the swiss national bank, berne, 20 june 2013. * * * i will begin today with the situation on the financial markets. then i will address the management of our currency reserves, before moving on to trends in the money market, as well as the current discussion regarding reference interest rates. finally, i will say a few words on the future of the repo market infrastructure in switzerland. developments on the financial markets in december, at the last news conference, i remarked on an easing of tensions on the financial markets. this easing largely continued in the first half of 2013. the government bonds of the european peripheral countries, in particular, benefited from the greater trust of investors, with ireland and portugal raising funds via long - term bonds on the capital market for the first time since 2010 and 2011, respectively. the buoyant mood on the financial markets was also demonstrated on the advanced economies ’ stock markets. in may, there were new historical highs in the us, the uk and switzerland. investors ’ risk appetite was encouraged not least by the very expansionary monetary policy around the world. various central banks, including the european central bank ( ecb ), again reduced their key interest rates early this year. the prospect of low yields on bond markets induced many investors to increase their equity investments. in japan, monetary policy announcements resulted in significantly improved investor sentiment, with the nikkei stock index climbing by 80 % between november 2012 and may 2013 on the back of a strongly depreciated yen and the ensuing higher profit expectations of japanese companies. in the positive risk climate, investments perceived as secure have lost value. a prominent example is gold : the dollar price per fine ounce of gold had risen in 2011 to a high of usd 1, 900. currently, it is approximately a quarter lower. government bonds perceived as secure have also fallen in value, even though their yields are still very low. this also applies to confederation bonds. while the yield on ten - year confederation bonds, for example, has significantly increased since the low point of last december, at around 0. 8 % it is still extremely low. movements in the swiss franc exchange rate matched this risk - friendly market environment. since january, the euro / swiss franc exchange rate has moved further away from the minimum rate of

chf 1. 20, and at times, values were recorded which were last seen in spring 2011, in other words, before the introduction of the minimum exchange rate. on a trade - weighted basis, however, the swiss franc has remained largely unchanged since the beginning of the year. the favourable developments on the financial markets, which have persisted over a lengthy period, were the result of a reduction in extreme risks. this was due, on the one hand, to measures taken by the ecb, and on the other, to the fact that, in the us, the ‘ fiscal cliff ’ was averted. as recent weeks have shown, conditions on the financial markets can change again swiftly. in japan, there has been a sharp correction on the stock market and the yen has again gained somewhat in value. meanwhile, in the euro area, there is a discrepancy between the generally favourable trend on the financial markets and the disappointing economic data. finally, in the us, a certain degree of uncertainty about the future monetary policy direction of the federal reserve ( fed ) has gained ground. overall, the market bis central bankers ’ speeches environment continues to be dominated by high levels of uncertainty, thereby remaining susceptible to sudden shifts in mood. management of currency reserves the easing of tensions on the financial markets also affected the swiss national bank ’ s ( snb ) currency reserves. these are mainly composed of foreign currency investments and gold. at the end of may, the snb held foreign currency investments of just over chf 440 billion ( cf. chart 1 ). due to our liquidity and security requirements, a large portion of our foreign exchange holdings are in government bonds and deposits with other central banks. this portion amounted to 78 % at the end of the first quarter of 2013. to further diversify investment risk and increase investment in real assets, we raised our proportion of equities from 12 % to 15 % in the first quarter. we currently hold equities worth around chf 65 billion, which is three times more than at the end of 2011. in this regard, we have widened our scope to include shares of companies with relatively small market capitalisation, as well as those in advanced economies not previously considered, with the result that our equity portfolio now covers all advanced economies. since we have invested relatively little in these new markets, our currency allocation has hardly changed in recent months. the proportion of gold in the currency reserves amounted to 10 % at the end of the first quarter