Market is assuming interest rate would go down. This is why you see 2 year yields close to 0,5%
I understand that with lower interest rates all these numbers are very close to zero anyways. So maybe you don’t lose much.
But I was only answering the question why people buy bonds. Bonds have higher return than cash in longer term. That’s mainly the reason.
In addition, if stocks crash due to recession, bonds can go up too as they are considered safe haven. So invested can get capital appreciation (tax free) in medium to longer duration bonds.
And that’s depending on the bond. There is term premium, meaning longer term bonds yield higher on average over longterm. And then there is credit premium (riskyness of the bond to default essentially). Credit risk for swiss bonds however is essentially zero. That’s why the yield is so low as well.
Also normally teh yield curve is upwards sloping and longer term bonds have higher yields. This is likely to be the case again in the not so far future.
Speculation is one reason. Yield is only one component of the bond return, you can also get capital gains.
If you’d bought long term US bond ETF TLT in April, you’d have a 14% capital gains alone.
If you believe interest rates are going to go down, you can bet on this with long duration, high convexity bonds. This is the reason that people bought the 100 year Austrian bonds.
Savings accounts are insured up to 100k and are often subject to limits on how much can be withdrawn without additional fees. It may not be practical for a company who needs bigger amount of cash on hands to juggle with several savings accounts in order to have all of it insured and enough of it available.
Incidentally, this is a factor making savings accounts more interesting for smaller investors like us: we don’t suffer that much from the added restrictions and the added pressure on bonds makes them less attractivre to us.
To go back to the topic at hand, I had a discussion with Migros Bank this morning, and I was pleasantly surprised that they offer 2.75% for construction loans (with a 500 fixed fee).
In comparison, BCV offered 3.15% + 0.15% trimestrial management fee, plus a 1k closing fee (I believe, or 1%?, it was waived in my case).
Credit Agricole also offered 2.75%, but they want us to move everything to them. Migros Bank only suggested it.
I don’t think I’ll be able to get any better, anyone has experience with Migros Bank and mortgages?
I’d argue not. Cash is by definition the most liquid. You can get accounts that have no limits on withdrawal.
I actually moved more to cash from bonds for additional liquidity. Although the Treasury market is the biggest and most liquid bond market, they did seize up during the pandemic forcing the Fed to step in.
Since I’m holding bonds in case the SHTF, then liquidity is important. So I switched some to cash and laddered others to ensure a constant flow of available cash.
Is it just a construction loan? or is it part of a home purchase mortgage? Stating the obvious but Migros may let you add the construction to the whole mortgage at the lower rate of the home mortgage.
I’m surprise for CA next bank because they advertise 2.25% on their web site for construction loans this week.
Right sorry, it’s 2.25% + 0.5% management fee.
Is it just a construction loan?
Yes. They all want you to consolidate with them, and they usually offer “packaged” deal, but the rates are usually terrible (BCV offered 1.93% for 10y fixed, no early consolidation; don’t know Migros Bank yet).
If you bundle the loans, so far they all offered a better rate on the mortgage itself, not the construction loan. So to me it looks like a better deal to simply get the construction loan, then shop around once the construction is done. Plus they don’t seem to offer SARON, only fixed.
I meant as part of the bundled construction loan/mortgage, though I don’t actually know yet for MB. BCV and CA didn’t, even though they have them for standalone offers.
Depends: there are banks with a framework contracts (1-10 years) and there are banks who are offering Saron without an expiration date.
As you can imagine, for both types of banks there are small written T&C‘s that they can adjust the margin - also during an active contract.
The banks do normally not change the margins, once the contract is signed. But I know some cases where a very low margin (0.45%) which was fixed couple of years ago, had to be adjusted to a normal market level (for that specific bank it was/is 0.90%).
still haven’t locked-in my rate, but need to do so before October 1st. Luckily, rates fell since posting my last table, and are currently at 1-3Y at 0.9%, 4-5Y at 0.95%, 6-7Y at 1%, 8Y at 1.05%, 9-10Y at 1.1%.
Contemplating locking in a 5Y at 0.95% but thinking about waiting for the SNB decision on 27th Sept. “Everything is priced in”, but what would you do?
Very good rates. I got offered 1,55 for a 10Y new mortgage with financing 79% of the value. May I ask is this a refinancing of a premier rang loan?
Also I noticed since the FED cut rates the 10 year SWAP in CHF goes up. What does this mean? Does it mean temporarily more expensive loans before the SNB cuts. Sorry for my basic question, I don’t have much EXP with mortgages and loans. Ony financial knowledge I have is HODL VT
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