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After some years of working in Switzerland I've decided it's time to invest some of my spare cash. I'm not an investment pro and have been thinking of buying some bank bonds as a no-hassle investment. In the course of my research I keep coming across the German term "Kassenobligationen". Can anyone tell me what these are? Are they the same thing as bonds?
Hi there,
The German term "Kassenobligationen" denotes medium-term notes. These are issued by banks at a fixed interest rate. Terms range from 1 - 10 years. While a medium-term notes are technically a type of bond, in Switzerland they are used in much the same way as fixed deposits are used in some other countries.
Medium-term notes provide an alternative to savings accounts for individuals who can afford to tie up assets for longer periods of time. However, interest is not always higher than that paid out by savings accounts.
You can compared the interest rates of medium-term notes issued by Swiss bank using the moneyland.ch medium-term note comparison. It is a good idea to compare interest rates to those of Swiss savings accounts. You can find these using the savings account comparison.
Best regards from Moneyguru
Do the current interest rates for medium-term notes apply for the entire term, or can interest rates change within the term (akin to savings accounts)?
Hi there,
The annual interest rate of a medium-term note remains the same throughout the full investment term.
For example, if a 5-year medium-term note issued by a Swiss bank has a 1% annual interest rate at the time it is issued, you will earn 1% interest per year for each of the 5 years in the term.
In this way, Swiss medium-term notes are similar to fixed deposits. When you invest in medium-term notes, you can calculate in advance exactly how much interest you will earn on your investment.
The downside of investing in medium-term notes is that your capital is tied up until the end of the term.
Best regards from Moneyguru
More on this topic:
Swiss medium-term note comparison
Forum: Are Swiss Medium Term Notes Covered by Bank Deposit Guarantees?
Bonds are also securities.
