Mutual funds amplify FX sensitivity to capital flows – study
Investment in Swiss bonds increasingly linked to franc’s value, SNB paper finds
The rise of mutual funds in domestic currency bond markets increases the sensitivity of exchange rates to capital flows, a study by the Swiss National Bank has found.
The paper, published on December 17, says the share of Swiss franc-denominated bonds held by mutual funds rose from approximately 5% in 2005 to nearly 50% in 2024.
The authors – Johannes Eugster, Giovanni Rosso and Pinar Yesin – also point to an increasing correlation between capital flows and the value of the franc in recent years
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