Responses of Swiss bond yields and stock prices to ECB policy surprises

Abstract We use event studies and local projections to analyse spillovers from European Central Bank (ECB) policy surprises to asset markets outside the euro area using Switzerland as a case study. Our results suggest that ECB policy surprises are more important for Swiss government bond yields than for Swiss stock prices. Decomposing bond yields into expected shortterm interest rates and the term premium reveals that both signalling and portfolio rebalancing effects explain the responses of bond yields of various maturities to surprises resulting from scheduled ECB policy decisions. The ECB’s forward guidance surprises have persistent effects on Swiss government bond yields. JEL: E43, E52, G15