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(Bloomberg) -- The Swiss National Bank’s efforts to stem the franc’s gain may be having unintended consequences.

As the SNB, and other central banks in Europe, ramp up their foreign currency-purchases, short-dated, high-quality bonds are seen as the likely landing spot for their cash, spurring a rally in German two-year notes. That, along with the European Central Bank’s own bond-buying and a demand for havens amid elections in the region, has pushed yields on the German securities below those on their Swiss peers for the first time since 2014. That change in the interest-rate differential threatens to weaken the euro against the franc even further.

The SNB has had to intervene “very strongly of late, at a heavier pace than last year,” said Karsten Junius, Chief Economist at Bank J Safra Sarasin Ltd. in Zurich. The “interest-rate differential in the short-term area has dropped to historic lows, and the exchange rate can only be kept if the SNB absorbs the flows.”

Swiss two-year yields were at minus 0.85 percent as of 11:09 a.m. London time, compared with minus 0.851 percent on similar-maturity German notes. The Swiss securities haven’t closed with a higher yield than Germany since November 2014, before the SNB removed its limit on the franc’s strength.

The franc was at 1.07386 per euro on Friday, having weakened about 0.9 percent in the past two weeks. It ended February at 1.06383, the strongest since August 2015. The SNB’s next policy assessment is scheduled for March 16.

(Corrects franc level in final paragraph.)

To contact the reporters on this story: Anooja Debnath in London at adebnath@bloomberg.net, Catherine Bosley in Frankfurt at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, David Goodman, Keith Jenkins

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