Short guide to CHF fixed income options

I just don’t have any personal experience with them so I refrained from adding things I wasn’t familiar with.

It’s a wiki, you can edit to add all the info (eg about brokerage costs). Also I think my main concern on individual bonds would be the spread, not the fees. I guess can check SIX to see what the typical spread is.

Didn’t realize this was a wiki I can edit, updated some info accordingly. Transparency on spreads (or the actual quotation for that matter) is a bit of an issue though, as there is not necessarily a lot of trading activity in individual bonds. But market makers should at least in theory keep trades civil.

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Bond Ladders. Has anyone actually built a CHF bond ladder with ETF or low cost instruments? Say to meet school fees or as a drawdown mechanism for the next few years FIRE liquidity?
I see that iShares do iBonds some annual maturing ETF with 1-10 year horizons (ie no capital volatility if held to reimbursement) and Invesco do BulletShares on the same principle, but their focus is USD.

https://www.ishares.com/us/resources/tools/ibonds

What would be the point of doing a bond ladder with an ETF? Isn’t the ETF already exposing you to a variety of maturity?

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To meet regular liquidity requirements without the exposure to the interest rate risk in the priciing… these products refund the capital at term of 1, 2, 3 years and are then “over”. Your are locking in a YTM %.

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Don’t think you should expect anything, all the yields are moving which makes it hard to predict (and might not be held to maturity). If you have a specific horizon and want to lock-in some rate, check fixed term deposit, bonds or notes.

Any change in options here [moved from Money market funds in CH], given the recent interest rate bumps? :slight_smile:
(Other than WIR/Cler savings accounts plus, and Cembra kassenoblis)

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I have removed vermoegenszentrum’s savings account comparison. It is less functional than the one from moneyland and clearly biased :laughing:

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Hi!

Migros bank has some good interest rate both for fixed term deposit and saving accounts. So, still one of the best solution for keeping the money liquid.

But now, the question: what is the risk (above 100k)? If we look at the rating, the bank « only » rates A while other similar bank tends to rate slightly higher. Is Migros bank a bit risky and special care is needed?

Rating as found here: Swiss Bank Ratings from S&P, Moody's and Fitch - moneyland.ch

Thanks!

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Most banks in Switzerland are not at any real risk, as long as the real estate market doesn’t collapse - and what none of us should forget, the 100k is what ist protected, if sufficient funds are in the insurance (ESI Suisse), as far as i know… so, if a larger bank would come to fail, this 100k would not get very far for a lot of clients :-)… The system is different than the one in other countries, at alest as far as i know :slight_smile:

Important thing regarding liquidity: bear in mind that saving accounts have pretty restrictive rule regarding at what rate you can get your money out of it… :wink:

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I don’t think there’s a high probability of a client loosing money in a bank failure in Switzerland. That being said, if I were willing to take on risk that can be mitigated, I would not keep my money in cash. Cash is for money I need available and can’t afford to loose, I wouldn’t give up on the esisuisse insurance for a few tenth of a percentage point of interest.

Savings accounts also usually have withdrawal limits, which is another reason to prefer using several accounts for bigger sums.

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Just stumbled upon this new offering from Leonteq: https://structuredproducts-ch.leonteq.com/news/all/overnight-return-index

It is an ETP on the SARON rate with 0.3% fee, so a ~1.4% rate currently. Could be an interesting alternative to short-term fixed deposits or savings accounts (with more flexibility, as there are no minimum holding durations). Trading on SIX starts on 15/09/2023.

I am not sure about the risk yet. The term sheet mentions that they do a collateral pledge according to a security agreement that you can order via phone, fax, or e-mail (why not just publish it online?).

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2 posts were merged into an existing topic: Swiss government bonds, bond funds

Oh nice, that could be very interesting with a 0.1% fee. I have not requested any details because 0.3% was too high to for me, but just wrote them an e-mail regarding the TCM agreement.

The ETP is tradeable on IBKR and spreads are reasonable. They seem to be always 0.02 (so ~4.5 days of yield) based on the SIX historical data, I guess you are almost always trading with Leonteq which is the market-maker.

It is a pity that you have to pay the stamp tax when buying / selling. With the current rates, this is a month of yield for a buy or a sale. So the product is not really suitable for short-term deposits.

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Are you sure? Shouldn’t be the case with a foreign broker like IB.

But unfortunately there’s a big question of security: what is going to happen if Leonteq is bankrupt?

Oh yes you are right, was reading the term sheet where they mentioned that stamp tax always applies, but the normal rules should apply for investments via foreign brokers.

If I understand the Triparty Collateral Management correctly, nothing should happen because the ETP is fully collaterized. But this of course depends on the quality / volatility of the collateral.

Received the TCM agreement today. I have not studied it in detail (45 pages of legal clauses), but in general, SIX ensures that there is always enough collateral and you are eligible to the proceeds of the collateral sale if Leonteq defaults. The most important points in my opinion are:

  • There is no overcollaterization requirement.
  • Leonteq has five business days to fix any undercollaterization.
  • When the collateral is liquidated, the agent is paid first and the holder of the product only afterwards.
  • Investment-grade bonds, equities of a standard index, and ETFs are accepted as collateral.

So overall it is more or less a margin loan to Leonteq (without overcollaterization). As long as there are no huge market swings, this should work pretty well, even if Leonteq defaults. But I am wondering how it would work in a black swan event where Leonteq defaults and a lot of assets drop in value.

Moreover, almost all of the liquidity comes from Leonteq. If they suddenly decide to no longer be a market maker for the product, you would probably have a problem, because who would then buy this? You cannot just redeem the collateral in such a scenario.

So for me personally, it is too risky for the cash part of my portfolio (which should have a risk as close as possible to 0 for me), but YMMV.

Did you find anything yet? I’m looking for a low-risk, short-duration, low-friction instrument to stash CHF temporarily within an IBKR account.

I use some pictet MMFs, there’s a 5 CHF transaction fee so depends how long you plan on using it.

(and I heard you can’t do frequent buy/sell, if you sell you can’t buy again for some time – maybe one month?)

Same here, I currently park my short term liquidity in “Pictet CH-Short-Term Money Market CHF”. I followed the holdings of quite a few funds for some time, this was the most convincing to me (a lot of SNB bills and hedged foreign government bonds, whereas others invest heavily in corporate bonds).

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