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Swiss C. Bank Buys German, French Bonds: Report

The Swiss central bank has started to buy French and German government debt from the markets to try to bring the Swiss franc down, Dow Jones newswire wrote on Saturday, quoting a report by German newspaper Frankfurter Allgemeine Zeitung.

Zurich, Switzerland
Panoramic Images | Getty Images
Zurich, Switzerland

On Friday, the Swiss franc soared against the euro and the dollar on worries about the euro zone's debt crisis and a dismal US non-farm payrolls report, as investors see the franc as a safe-haven.

But the Swiss central bank has tried to weaken the franc by injecting liquidity in the money markets, pushing short-term yields into negative territory. On Friday, top Swiss politicians spoke in favor of the measures taken by the central bank, which was criticized for its interventions in 2009 and 2010 to stem the currency's rise.

The Swiss National Bank will only buy German and French bonds because it considers them the most secure and liquid in the euro zone, the Dow Jones report said, quoting sources speaking to the Frankfurter Allgemeine Zeitung.

On Friday, talks between Greek officials and European Union and the International Monetary Fund paused for 10 days, amid disagreements over how much its plans to cut the budget deficit have fallen behind.

Earlier this month the European Central Bank started to buy Italian and Spanish bonds in the markets in a bid to stop yields on these countries' sovereign debt from soaring but some analysts have doubted that such a move will be efficient in the long-term as the debt crisis is still causing ripples in the markets.

The run to the safety of the Swiss franc has sparked fears in Switzerland that the country will go through a recession because of the strength of its currency.

Contact Europe: Economy