Swiss National Bank Intervention Imminent

The last time the EURCHF was trading in the mid 1.37 area, the SNB was stupid enough to intervene, and load up its balance sheet with even more increasingly devalued euros (which as we pointed out previously, has now reached a total of CHF 232 billion). Also, these interventions are now completely futile, as the half life of the rate returning to previous levels is about 4 hours. Nonetheless, we are confident this will not stop the SNB from pulling one off imminently, as the surging franc means nothing but huge pain for Central and Eastern European country banks, which are levered to the gills in CHF-denominated mortgage debt, which is getting more and more expensive even as it generates less and less cash flow. Letting the franc appreciate uncontrollably simply means yet another liquidity crunch episode is about to break out, this time in the Baltics, Central Europe and the Balkans. Keep an eye out for crazy spikes throughout the day, which will be comedy defined as it will refute everything the bank said last night about growth prospects, tapering of the loose policy and non-interventions. Rock, meet hard place.

Comments

[Turd Ferguson]

I must correct you, Tyler. I do not expect a SNB intervention at this level.

I do expect any minute, however, a new GS recommendation to their "clients" advising them to cover their Euro short positions established just last week at 1.1850.

Brilliant!!!!

http://www.youtube.com/watch?v=3DPKf7y1F-Q

[gmrpeabody]

+6

[LeBalance]

+666

[mcguire]

central/eastern european real estate crisis is the shoe that never dropped... the dirty european subprime secret. 

[jbc77]

How bad we talkin' over there? What type of bubble gum have they used to keep it glued together this long?

[Ripped Chunk]

Real bad

[sumo]

The loans were in CHF, yes?

That story surfaces from time to time, then disappears. Like icebergs in the fog near the Titanic's plotted course.

[unwashedmass]

thank you. putting in orders now to give the swiss a boost for when they do it.

[Dismal Scientist]

SNB seems to be betting on recovery. Or else it can't handle the truth. I would point out though that fiscal austerity in Europe does not mean consumer cyclicals being marked down will kill the Eurostoxx. They're a pretty small percentage of the total earnings. The Germans don't spend anyway, they will just save slightly less under an austerity regime. Its still the banks that are the problem. Debt/equity swaps and give the bondholders a haircut, I say. No more bailouts for TBTF in Europe, let the taxpayers breathe a bit...

[BobWatNorCal]

Hmmm, best case would be that they find another sucker to intervene on their behalf....where is Timmay's number?

[mephisto]

But if the SNB say one thing overnight and then do completely the opposite next day, don't they lose all their credibility?

Oh, right. Sorry. Carry on.

[jbc77]

Looks like the euro is getting a crank as we speak......

[boeing747]

Dollar needs live support again, haha, I'm waiting Spanish show premieres on CNBC.

[homersimpson]

"Rock, meet hard place." DOH! *swings* DOH! *swings* DOH!

http://www.youtube.com/watch?v=ukpHh-G5Hg4&fmt=18

[Cyan Lite]

SPX rally in 3....2....1....

[Ben Graham Redux]

The timing of this initial post was brilliant - around 13 minutes before the euro caught a bid.  Isn't it pathetic how these CB moves can be anticipated?

[snb]

snb press release from this morning:

"The recovery of the global economy continues and the Swiss economy is benefiting from
it. Although the weakening of the euro with respect to the Swiss franc is dampening
export activity, this activity is being supported by growth in foreign demand. The
domestic sector is still performing favourably. For 2010, the SNB is now expecting real
GDP growth of about 2.0%. In view of these pleasing developments, the deflationary risk
in Switzerland has largely disappeared."

i.e. they are running out of ammo...

[BlackBeard]

It's opex people.  Calm the fuck down and wait for Monday.

[GovernmentMule]

Round and round the cobbler's bench
The monkey chased the Euro,
The monkey thought 'twas all in fun
Pop! Goes the Euro!

A penny for a spool of thread
A penny for a needle,
That's the way the money goes,
Pop! Goes the Euro!

A half a pound of tupenny rice,
A half a pound of treacle.
Mix it up and make it nice,
Pop! Goes the Euro.

Up and down the London road,
In and out of the Eagle,
That's the way the money goes,
Pop! Goes the Euro!

I've no time to plead and pine,
I've no time to wheedle,
Kiss me quick and then I'm gone
Pop! Goes the Euro!

[Grand Supercycle]

Those EURUSD bullish warnings have strengthened further today.

Vice versa for the USD index of course.

It seems the current EURUSD downleg has ended.

http://stockmarket618.wordpress.com

[badcompany]

Swiss National Bank keeps policy on hold at its quarterly assessment today, as expected, with a 0.25% target for 3-month Libor in a 0.0%-0.75% range.

• Following strong data for late 2009 and early 2010, SNB upgrades its growth forecast for 2010 from "around 1.5%" to "around 2.0%".
• Inflation forecast up marginally from 0.7% to 0.9% for 2010 and from 0.9% to 1.0% for 2011, but unchanged at 2.2% for 2012.
• As in March, SNB warns of future rate hikes, saying that "monetary policy cannot be maintained over the entire forecast horizon without compromising medium and long-term price stability".
• However, SNB emphasises that "uncertainty has increased" over the last 3 months, with recent financial market tensions adding to the downside risks: "Should these downside risks materialise and, via an appreciation of the Swiss franc, lead to a renewed threat of deflation, the SNB would take all the measures necessary to ensure price stability".
• This implies the chance of further fx interventions and further quantitative easing.
• But note that the SNB now takes a softer line on the exchange rate. On 11 March, when the CHF traded at 1.46 to the euro, the SNB had warned that it "will act decisively to prevent an excessive appreciation of the Swiss franc against the euro". Now, the SNB has dropped this sentence. Instead, it refers to an appreciation of the CHF in the context of a potential threat of deflation, in the sentence quoted above
• As the SNB has marginally increased its inflation forecasts for 2011 and 2011 and expect 2.2% for 2012, the threat of deflation does not seem close, though. The SNB may be signalling that, as long as the downside risks to growth and inflation do not materialise, the SNB may grudgingly accept the current exchange rate.