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Currency Peg Causes 50% Surge In Swiss National Bank Balance Sheet, Major FX Losses

Tyler Durden's picture





 

The September Swiss National Bank balance sheet update is out and while it reportedly indicates balances at the end of August, it appears that the SNB intervention in the FX market (i.e. the currency peg) started early, which would make sense as the first peg rumor hit on August 11. As a result, as the chart below shows, the latest central bank balance sheet to be completely devastated as a result of currency wars is that of Switzerland, where both Foreign Currency Investments and the total balance sheet increased by just under 50%, the biggest such monthly increase. In fact, in September, "aggregate short and long positions in forwards and futures in foreign currencies vis-a?-vis the domestic currency (including the forward leg of currency swaps)" increased by $92 billion CHF or just about $100 billion - a whopping 20% of Swiss GDP! And this is the capital at risk for Switzerland to avoid having its currency trading a parity with the euro since the bulk of this increase is due almost certainly purely to EUR purchases. And here is the bad news: since the bulk of the purchases were made in the 1.40+ area, we can't wait to find out just how NZZ and other Swiss financial publications will react tomorrow when they learn that the SNB has experienced an immediate 5% drop in its "assets" courtesy of the subsequent plunge in the EUR. And with the SNB's total balance sheet at a record (?) CHF 365 billion, something tells us that the days of this latest attempt at repegging the Swiss Franc to some arbitrary number are coming to an end, and with that Hildebrand's futile attempts at preventing parity.

h/t Hermel

 


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Sun, 10/02/2011 - 17:34 | Link to Comment speconomist
speconomist's picture

Hildebrand, you crazy little Keynesian, you deserve that and a middle finger.

Sun, 10/02/2011 - 17:47 | Link to Comment Mike2756
Sun, 10/02/2011 - 18:09 | Link to Comment knukles
knukles's picture

Teach them little Gnomes to fuck with my Swissy positions.
Throw them the hairy end of the lollipop as they sink into Lake Geneva.

Modern Day Lesson: Never, ever have a central bank as a counter-party anymore.

Sun, 10/02/2011 - 18:23 | Link to Comment Ratscam
Ratscam's picture

what do you expect from a guy with a degree in international relations?

Sun, 10/02/2011 - 17:35 | Link to Comment Popo
Popo's picture

Personally, I cant wait to see another "rogue" trader blow up.

Right about now he's realizing he's fucked... and he's doubling down... for the second time...

Give it a week before TSHTF...

Sun, 10/02/2011 - 17:34 | Link to Comment Fips_OnTheSpot
Fips_OnTheSpot's picture

Safe heaven: Switzerland. </sarc>

Sun, 10/02/2011 - 17:45 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Green!

Switzerland has really changed a lot.  Pity.  There was (and always should be) a safe place, run by prudent people, where people can feel SAFE about putting their money there.

Would the Bearing put any money into Switzerland?  Not a chance...

Sun, 10/02/2011 - 19:31 | Link to Comment BigJim
BigJim's picture

There's an interesting book by Swiss chappy Ferdinand Lips called "Gold Wars: The Battle Against Sound Money As Seen From A Swiss Perspective." It's been a while since I read it, but he said the beginning of the end was when the big Swiss banks went global, and developed large presences in the US. This meant the US could put pressure on them, and they in turn put pressure on the Swiss government to... 'reform'.

A lot of the Swiss public were pissed off at the time... but I guess Switzerland has a majority of sheep, like everywhere else.

Mon, 10/03/2011 - 01:20 | Link to Comment AGoldhamster
AGoldhamster's picture

the number/percentage of sheep possibly always is more or less the same.

it's just that today the poeple and taxbase is not ruled anymore by honest and smart men from the streets - but instead from thieves and whores.

7 decades earlier - 1 tax dollar was used to pay state expenses - today 3/4 of that goes in fact into the pockets of those thieves and whores (mostly bankers and wall street types, media, farmers, big companies, defense industry, oil industry, parties, zillions of new and useless jobs for bureaucrats, ...) and a small rest is for paying state expenses as it was originally thought.

the whole tax distribution system/law is corrupt from the highest levels ... while the sheep are still the sheep, though today with just more red bull, pommes, tv, porn and sports.

fish stinks from the head ... as a result of modern capitalism & democracy which allows and even supports uncontrolled growth of cancers of thieves and whores ...

governments not anymore for the the poeple - but for how to steal the most from the taxe base and rule the army of sheep

Sun, 10/02/2011 - 17:36 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Printing money has never worked in the history of the world. Looks like it's going to take a global currency crisis with a major inflation to learn these lessons the hard way again. It is too bad because the middle-class will get hurt the most.

Sun, 10/02/2011 - 17:40 | Link to Comment Popo
Popo's picture

yeah, but typically its the bombs that come next, that really hurt the middle class...

Sun, 10/02/2011 - 17:47 | Link to Comment X.inf.capt
X.inf.capt's picture

.'s

your both right, unfortunately....

Sun, 10/02/2011 - 17:47 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ b_B and Popo,

Yes, both results are common through history, inflation and war.  Three are variations (deflation and war, and so on), but your points are correct.

Plan accordingly, prepare...

Sun, 10/02/2011 - 17:54 | Link to Comment bid the soldier...
bid the soldiers shoot's picture

" It is too bad because the middle-class will get hurt the most."

The implication being that the lower class is still suffering from the toilet plunger up their butts and now it's the middle classes' turn. In the History of the World, the middle class will always have its turn before the upper class.

If, for some reason they don't, stop the press, "man bites dog.'

Sun, 10/02/2011 - 17:39 | Link to Comment Wolferl
Wolferl's picture

Hildebrand deserves to be shot. Guess i make a proposition in the next SNB assembly. ;-)

 

Time to go long CHF, bitchez.

Sun, 10/02/2011 - 17:42 | Link to Comment Cassandra Syndrome
Cassandra Syndrome's picture

The Market always wins when people try to intrinsically effect it

Sun, 10/02/2011 - 17:47 | Link to Comment RobotTrader
RobotTrader's picture

 

 

I told 'ya gold bugs to root for Dow 15,000, not Dow 5,000.

More printing.  Not less.

More PPT intervention.  Not "End the Fed".

Lots of FX and metals traders are going to see their accounts vaporized when this rout is all over.

Sun, 10/02/2011 - 17:50 | Link to Comment SILVERGEDDON
SILVERGEDDON's picture

Shove your paper dreams up your asshole, and light them on fire before the market does, dip shit. Then, melt down some silver into a big safe haven dildo, and shove it up there to prevent infection. See which reaming feels best - in the end, so to speak...........................

Sun, 10/02/2011 - 17:51 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

@ RobotTrader

Traders are always at risk.  Ex-traders (like me) much less so.

Agree more printing and more PPT intervention.  And that TPTB will not audit, much less end, the Fed.

Robot, I would always be interested in seeing some thoughts of yours on a longer-term horizon.

Sun, 10/02/2011 - 18:11 | Link to Comment X.inf.capt
X.inf.capt's picture

more printing= higher PM values

thanks for the encouragement, RT, i knew buying physical would pay off.

RT, YOURE THE BEST!

Sun, 10/02/2011 - 17:55 | Link to Comment HamyWanger
HamyWanger's picture

Yup. In the eternal battle between the Pig Men and the Spartacus-wannabes, the Pig Men always win. That's the undisputed teaching of history. 

The Federal Reserve Bank System will still be alive and kicking 1000 years from now, to the great despair of redneck silverbugs and nerdy doomers. 

Sun, 10/02/2011 - 17:58 | Link to Comment X.inf.capt
X.inf.capt's picture

+1 for satire

brilliant, you make us newbies think...

Sun, 10/02/2011 - 18:14 | Link to Comment disabledvet
disabledvet's picture

The struggle must continue as the future or "change itself" (just the future?) is still at stake. We have no way of determining outcomes of course--but the human race through the media en toto but also through our historical institutions of "government" and "industry" engages in the most relentless form of determinism imaginable. But is it certainty or just what we imagine?
http://www.youtube.com/watch?v=IxjnG1X510A&feature=player_detailpage

Sun, 10/02/2011 - 19:37 | Link to Comment BigJim
BigJim's picture

And.... he's back!

So, if we're looking at Rome analogies, I guess in the following events

  • Battle of the Allia (387 BC) – Rome is sacked by the Gauls after the Battle of the Allia
  • Sack of Rome (410) – Rome is sacked by Alaric, King of the Visigoths
  • Sack of Rome (455) – Rome is sacked by Geiseric, King of the Vandals
  • Sack of Rome (546) – Rome is sacked and depopulated by Totila, King of the Ostrogoths, during the war between the Ostrogoths and the Byzantines

    the attackers were the Pig Men, and the Romans were Spartacus?

     

    Sun, 10/02/2011 - 20:26 | Link to Comment chump666
    chump666's picture

    Nah we are done. 

    Had a good run though...but it's finished.  Look around, three regions going down the toilet faster than the toilet can be flushed: Europe/US/and yes China.

    eveything comes to an end. 

     

    Sun, 10/02/2011 - 23:49 | Link to Comment Astute Investor
    Astute Investor's picture

    The Federal Reserve Bank System will still be alive and kicking 1000 years from now, to the great despair of redneck silverbugs and nerdy doomers.

     

    Sorry, but the Federal Reserve Bank System will not be a 1000-year Reich and your forecast, like Adolf's, will ultimately be proven to be far too optimistic.  The good news is the world will be filled with more and more small, non-discretionary, home decor items over the next 100 decades.

    Sun, 10/02/2011 - 18:13 | Link to Comment tickhound
    tickhound's picture

    Why, when Dow 10,000 has worked so well the last decade?

    More printing is a mathematical certainty in our current system.

    End the Fed would end plunge protection AND plunge proliferation.

    Vaporized is relative.  The outperformance trend remains.

    Sun, 10/02/2011 - 20:22 | Link to Comment chump666
    chump666's picture

    commodity markets crunch so will equities, DOW is going to be slaughtered next quarter.

    Perfect storm brewing on three fronts.

    I would load up on PM's (now) once the whole system just cracks up, got that pencilled in for 2012

    Meantime you can finally short stocks, swing trade on highs/lows/ minis etc.  If the FED start printing like the madmen that they are, depending on copper, they can't get copper bid - forget QE.   Still won't elevate markets.  Hence the 2012 doomsday trade.

    Sun, 10/02/2011 - 17:47 | Link to Comment Fips_OnTheSpot
    Fips_OnTheSpot's picture

    On top: Swiss Gobberment is thinking about negative interest on foreign accounts to scare people out of swiss banks.

    Sun, 10/02/2011 - 17:47 | Link to Comment SILVERGEDDON
    SILVERGEDDON's picture

    Heildie gets caught with his dick still up the CHF goat's asshole, clamped on like a dog in heat, and the market bucket of cold water in the face is not gonna de couple his miserable ass from the goat! Send in the proctologists, and the castration specialists !!!!

    Sun, 10/02/2011 - 17:54 | Link to Comment misterc
    misterc's picture

    Tyler,

    I guess you are wrong? How come the Swiss won't keep their currency pegged? Just because of some arbitrary balance sheet at their central bank in regards to other fiat currencies? I don't understand. Can someone help me out? What exactly should make the Swiss leave their currency UNpegged?

    Sun, 10/02/2011 - 18:47 | Link to Comment Wolferl
    Wolferl's picture

    mistrec,

     

    CHF is not pegged to EUR in an administrativ sense. The SNB just promised to buy every EUR for 1,20 CHF. But if there will be a really hard attack by the markets the SNB will not be able to do it.

    Sun, 10/02/2011 - 18:00 | Link to Comment JW n FL
    JW n FL's picture

     

     

    so.. if someone where to be short the swiss franc becuase they tied that really good money to the shitty euro.. then someone could have made money? assuming that the euro would cause further harm to the swiss franc.. I have to be honest, I was taken back by the news that the euro had hurt the swiss franc and I would be even more surprised going forward if the euro cause yet more harm to the swiss franc!

    who knew?

    never would have guessed!

    next thing you know.. the swiss will need a bailout and austerity measures!

    tax cuts for the top .01% BITCHEZ!!

    Sun, 10/02/2011 - 18:07 | Link to Comment TheArmageddonTrader
    TheArmageddonTrader's picture

    The peg will end dramatically, a la Soros vs the pound, but not this year.

    Sun, 10/02/2011 - 18:13 | Link to Comment swissaustrian
    swissaustrian's picture

    Hopefully, they´re buying gold with these fx reserves... at least one can hope :(

    I closed my USD/CHF longs at 0.9. Opened them at 0.71. Maybe I´m a bit early but who cares with a 225% profit...

    Sun, 10/02/2011 - 18:21 | Link to Comment ISEEIT
    ISEEIT's picture

    It is central planning at it's finest. These brave souls, courage and wit forged in the furnace of academia, who step forward bravely to sacrifice all in pursuit of the altruistic goal of dominion over the forces of evil capitalism.

    Wish them Godspeed and for the wind to be at their backs!

    These folks really will solve the worlds problems.

    Trust them?

    Sun, 10/02/2011 - 18:27 | Link to Comment chump666
    chump666's picture

    Total idoits

    Sun, 10/02/2011 - 18:32 | Link to Comment oogs66
    oogs66's picture

    In 6 months they will probably be begging for a strong currency

    Sun, 10/02/2011 - 18:33 | Link to Comment Ye Ye
    Ye Ye's picture

    The balance sheet is less important to SNB than risks of recession and deflation.  The data right now supports their policy.

    Going long CHF right now is suicidal.  They have lots of room to f up speculators by moving to 1.25 for a while just to be spiteful.

    Sun, 10/02/2011 - 18:49 | Link to Comment chump666
    chump666's picture

    No they are a grade idoits.  You then just short the EUR.  Eventually the Swiss will the hit with massive inflation as the rest of EZ melts into a stagflation depression. 

    Sun, 10/02/2011 - 18:34 | Link to Comment Atomizer
    Atomizer's picture

     

     

    Hildebrand must create another false sense of security to rally the lemmings into conformity. Meanwhile, Obama has more theater war's than Bush. Media remains silent because forming opinions results to a large corporate paycheck to insure the mission is spread. 

     

    Barack Obama: Impeachment Of George W. Bush Off The Table

    Barack Obama got a bit testy when interviewer Chistiane Brown pressed him on the issue of impeaching President George W. Bush. This interview was aired on radio station KJFK (http://www.1230kjfk.com/news.asp) during the 2008 Presidential campaign.

     

    Aired on Hardball 12/04/07
    Joe Biden said in 2007, talking about George W Bush, that the President has no constitutional authority to go to war with Iran without congressional approval. He said he would push for an impeachment. Will he push to impeach President Obama for doing the same thing with Libya?

     

    Another old media tool has been thrown under the bus.. 

    Cindy Sheehan Calls for Impeachment of George W. Bush

     

    She has begun to attack Barry Soetoro. LOL 

    Cindy Sheehan on Pelosi, Obama, Afghanistan, Iraq & Iran

     

    Bet those days using Crawford ranch woke this woman up. Before Bush gave her a chance..

    Cindy Sheehan Arrested At Bush Ranch

    Do you see how paid tools work with or against? LOL

    Sun, 10/02/2011 - 18:48 | Link to Comment DoChenRollingBearing
    DoChenRollingBearing's picture

    Fabulous post Atomizer!  Hahahaha!

    OBAMA now is the one at risk for impeachment.  I think from here on out, all major contenders will keep their yaps shut about impeachment.  Now everyone sees that the shoe can be on the other foot.

    Cindy Sheehan, LOL...  Right under the bus, right on schedule!

    Sun, 10/02/2011 - 18:35 | Link to Comment buzzsaw99
    buzzsaw99's picture

    a small price to pay to maintain a fabulously weak currency like everyone else.

    Sun, 10/02/2011 - 18:46 | Link to Comment Piranhanoia
    Piranhanoia's picture

    Please help out on this one as it isn't my thing, but wouldn't the Swiss currency rebound almost instantly when unpegged? If they are aware of this and are trying to protect the Euro,  they really aren't losing something they will almost certainly regain where the Euro would be less likely to rebound?  The good will that goes with it would not be unnoticed either in trying to help their neighbors?  Is this at all logical from a soverign that is going to have plenty if disruption strikes elsewhere?

    Sun, 10/02/2011 - 20:28 | Link to Comment Schmuck Raker
    Schmuck Raker's picture

    They didn't peg to be neighborly, though that's a nice little boost to their image, to be sure.

    The goal was self preservation.

    A stronger franc makes their exports less competitive. Also, many mortgages in Eastern Europe are denominated in Swiss francs, and owed to Swiss banks. Better a hair cut than losing one's head.

    If I'm way off base I'm sure others will tell us so.

    Mon, 10/03/2011 - 00:55 | Link to Comment combatsnoopy
    combatsnoopy's picture

    So what is Switzerland exporting? What is Dubai exporting?  
    The mortgage part makes complete sense though.  And then again, it appears that Argentina and oh, maybe Israel can step in.  The business of tax shelter is no longer monopolized in the Alps.   

    Sun, 10/02/2011 - 18:48 | Link to Comment Atomizer
    Atomizer's picture

    BTW. The Bush song batten has be handed to Obama.

    Counting bodies like sheep to the rhythm of the war drums

    Keep in mind Attackwatch, your boy is going to have to explain about Egypt & Libya. Public is wide awake. At the end of day, the bankers will have zero liquidity. Can't wait to bid on the cheap properties in the Hamptons.

     

    Sun, 10/02/2011 - 18:50 | Link to Comment DoChenRollingBearing
    DoChenRollingBearing's picture

    With all that gold we've been buying & saving?

    I don't know if I would want those kinds of neighbors though...

    Sun, 10/02/2011 - 18:54 | Link to Comment ivars
    ivars's picture

    Pls check this post in TF metals:

    http://www.tfmetalsreport.com/comment/64599#comment-64599

    They allow posting pictures, and thus post becomes much more informative.

    Sun, 10/02/2011 - 22:11 | Link to Comment slewie the pi-rat
    slewie the pi-rat's picture

    they tried it here, along with anything else anybody could think of, and vacationed in crash city prior to server meltdown...

    ...there may have been drugs and alcohol involved on the maiden voyage...tyler, especially...and maybe 3-500 others...and fighting...oh!  the humanity!

    Sun, 10/02/2011 - 23:06 | Link to Comment slewie the pi-rat
    slewie the pi-rat's picture

    nice article

    isn't hildie  backed by the FED and any other NWO types who can take euros off his hands~~japan, china, britain...  there may be some "lines" established to support the euro via the SNB?  possibly?

    this is liquidity.  subsidized, ionized, and sanforized, BiCheZ!

    the swiss will print fiat francs till the cows come home!

    are the swiss ready for this? 

    hey!  somebody's gotta get the business!

    Sun, 10/02/2011 - 23:22 | Link to Comment chump666
    chump666's picture

    Major bad vibes coming out of Asia, thin markets and major selling.

    This is bad...

    Mon, 10/03/2011 - 02:36 | Link to Comment Smithovsky
    Smithovsky's picture

    I think the Swiss are on to something.  An official peg at 1.2 and, as importantly, the accompanying rumors of a possible increase to 1.25 will keep many traders from doing the unpeg trade (at least in the mid-to-lower ranges of the 1.2-1.25 range) and will therefore require minimal involvement from SNB.  The negative trade effects of eurchf at 1.05 would be much more devastating to the Swiss economy than the SNB's loss from currency intervention, especially one constructed in such a way (peg+rumor of possible higher peg).  The extra $100B they bought before the intervention should help cancel out some of the losses of buying $200B at 1.4, until the peg is gone, of course.  I know the Swiss banks have extra capital but their assets are still 4 times the Swiss GDP - please remind me, why is it a safe heaven again?  

    Mon, 10/03/2011 - 03:37 | Link to Comment defcon
    defcon's picture

    Next move, Switzerland joins the Euro

    Mon, 10/03/2011 - 09:49 | Link to Comment PontifexMaximus
    PontifexMaximus's picture

    à propos Hildebrand bashing: foreign curr. inv. as of july were mounting up to chf 188.7 billions, as of august they were chf 281.0. FYI interventions started on sepember 6th. make up ur mind. and à propos the ubs guy in london, maybe i'm a lunatic: SNB is holding up to 11% in shs (ETF's). do you follow......

     

    Mon, 10/03/2011 - 14:39 | Link to Comment SILVERGEDDON
    SILVERGEDDON's picture

    Quite Franc-ly, my dear, I don't give a damm!

    Do NOT follow this link or you will be banned from the site!