Banking News

Medium Term Notes: Yields Slide

February 3, 2015 - Benjamin Manz

As a result of the low interest environment and the National Bank’s negative interest decision, the majority of Swiss banks have radically lowered yield rates for medium term notes since the beginning of the year.

Mean yield rates for medium term notes in Swiss francs are 0.21% for 1 year, 0.19% for 2 years, 0.24% for 3 years, 0.32% for 4 years, 0.39% for 5 years, 0.48% for 6 years, 0.6% for 7 years, 0.71% for 8 years, 0.81% for 9 years, 0.87% for 10 years.

Some banks, like PostFinance, have stopped offering yields altogether, even for longer terms. Other banks, like the ZKB, the BLKB and Bank Coop currently do not offer medium term notes at all.

The highest yield rates are still offered by Cembra Money Bank. The bank uses medium term notes as a means of refinancing its lending business.

The mean rates for euro medium term notes are 0.34% for 2-year terms, 0.4% for 3-year terms, 0.438% for 4-year terms, 0.505% for 5-year terms, 0.61% for 6-year terms, 0.703% for 7-year terms, 0.81% for 8-year terms, 0.905% for 9-year terms and 1.013% for 10-year terms.

Interest rates for medium term notes are particularly sensitive to changes in the overall interest rate environment, and because of this, they are a useful indicator of changes to other yield rates.

The reason why medium term notes are exceptionally sensitive is that their interest rates are fixed for the entire term. Once medium term notes have been purchased, the bank cannot change their yield rate. With savings and checking accounts, on the other hand, the bank has free reign to change interest yield rates at any time.

The team

More on this topic:
Swiss medium term note comparison
Swiss savings account comparison

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.