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.