Meanwhile In Switzerland...

Tyler Durden's picture

... The entire bond curve through the 5 year point is now negative (for the first time ever). At this rate, courtesy of the FX peg and the SNB's free put option, whereby EURs are converted into CHFs at a furious pace even as the facade of a collapsing Eurozone is itself crumbling, and the proceeds are use to buy Swiss bonds ever further into negative territory, we may soon have an entire bond curve trading at negative territory. Which, paradoxically, would lead to that Keynesian wet dream: the more debt Switzerland issues, the more money it would make courtesy of negative interest expense, literally, and the faster it would pay down its debt. Curiously, this may not be a bad offset to losses that the SNB is currently experiencing due to its currency peg. And some thought bizarro world was a sitcom construct.

Chart: BBG

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Peter K's picture

More Free Money:) I mean really free free money:)))))

SilverTree's picture

Gold is rockin-and-rolling today!

xela2200's picture

It is finally behaving as expected. Europe bad should be good for gold. Not the other way around.

Cyrano de Bivouac's picture

Why doesn't the SNB buy gold?

Ghordius's picture

mainly because Uncle Sam would get mad at the Confederates. He already pushed them to sell quite a lot of their shiny in 2000. But since he is pushing them a lot, lately, eventually they could lose their tempers...

jus_lite_reading's picture

I paid myself back the $40 I owed myself and then splurged the $40 on a steak dinner with mashed potato pie. Then borrow some more from myself. Making money the easy way has never been easier. 

CHX's picture

Because they want to keep a fixed exchange rate to the Euro. (1 Euro ~ 1.2 CHF). The surrounding EU-zone is Switzerland's' most important trading partner, and as S. export of high quality industrial goods and tourism are important to the CH economy, an overly strong CHF is "bad for the economy". Last summer, the EUROCHF fell as low as 1.05 and exporters were outcrying loudly. So they enganged in the currency war, and started that peg last September (same time when the major gold-smackdown occured from the last all-time high in USDs).


Negative free money.....even better than just plain ole' free money. 

disabledvet's picture

"Pay to play" meets "Pay to pay."

GMadScientist's picture

More like "pay to keep your savings from melting down to syrup".

Captain Benny's picture

I'm not a bond junkie, but I've got to wonder why the 3 month is actually positive.  Is there some kind of currency swap situation that enables this?


The true value of currencies measured in Gold is falling fast.  Gold is about to erupt...

DeadFred's picture

The SNB meets Thursday and Saxo bank has increased margins ahead of the meeting. The peg is being pushed hard now as the shorts are running for the doors. Not being a bond wonk myself I would have thought the 3 month would be the perfect place to be to position for a change in the peg. Of course I've found over the years if I think something and the market thinks something else it's likely I'm the one who's wrong.

Ghordius's picture

hehehe, wait until the 10y is negative...

LULZBank's picture

Spain is no Switzerland either.

Ghordius's picture

the funny thing is that the Swiss are starting to talk about this floor as if it were a dam. now, of course, most people are scared of dams, but the Swiss (bless their little souls) are very fond of engineering and dams.

since the debate at the moment is mainly between setting the floor to 1.40 from 1.20 (i.e. cheapening the CHF vs the EUR) OR leaving it as it is, they will soon start to talk about printing more and buying something tangible with it (they are the prepper nation of the world). harnessing the power of this dam. we are not yet there, though

now, what could they buy with fresh notes that is tangible and a store of value? they already have bunkers, arms and ammo to last for three world wars... they already have foodpiles for several years...  hmmm... any ideas?

malikai's picture

The whole nation will be piling in on those $0.03 ITM calls.

flyingcaveman's picture

Municipal bonds..... bitches.  

GMadScientist's picture

Oooh..pick me pick me!

A whole buttload of bubbly American bonds; they will be consumed with liquidity preference.

disabledvet's picture

I must say once these rates rationalize what happens next will be a sight to behold.

davinci7_gis's picture

It's really strange to see people buy bonds on any measly uptick in the SPX....this is when you KNOW things are bad!

El Oregonian's picture

Hey, it's opposite day! Yea!!!

Village Smithy's picture

What could go wrong!

Alejandrito's picture

Too much money, chasing too few [SAVE] assets.

TonyCoitus's picture

Fuckin A man, I'm gonna start my own country and sell negative bonds!  Feel free to send me your money in advance.  WTF

NotApplicable's picture

Always entertaining to see that in writing.

Some expressions are better left in the spoken word.

LULZBank's picture

In this scenario ... is it better to hold CHF or Gold in the short term?

SilverTree's picture

Hold on to your nutts...and gold too.

LULZBank's picture

My nutts are price inelastic.

But, I meant if the CHFEUR peg was to break, Gold might get cheaper in CHF?

ThirdWorldDude's picture

The difference will be that when the peg breaks, gold will be CHF3000 instead of CHF4000 per ozt, but it's price in EUR will rise by the minute. 

Mr. Fix's picture

Physical gold and silver.

Peter Pan's picture

If things change suddenly and violently you may find your local bullion dealer with his shutters down and your ability to convert to gold might be between nil and zero. The pursuit of profit must not make you blind to the possibility of large capital losses.

LULZBank's picture

Things will not change suddenly and violently, without a prior warning atleast. Its a step by step process. Anyway dont worry about it.

Am I correct in thinking that, if adn when the CHFEUR peg breaks, Gold will go down in CHF for a while?

suls's picture

Why would you relate the two to Swiss gov bonds?

disabledvet's picture

Well one thing is certain: the Swiss guards aren't going to invade anyone. Where "The Restoration" comes from after all is anyone's guess right now tho.

Peter Pan's picture

Things that don't make sense seem to dominate the financal and economic landscpe. Instead of recognising the signs and taking the exit with real assets, we are stuck like deer in headlights at the sight of a stock market that still shows movement thanks to the use of an electric money prod.

FranSix's picture

Operation Twist was meant to prevent negative nominal rates, but in aggregate, you're going to get negative nominal rates somewhere.  This situation is the same as last year, where nominal rates turned negative on short dated treasuries, and gold saw a parabolic rise.  What's next is German bunds going negative again.  Or perhaps UK rates, being below 0.5% at the short end of the curve means that whatever their plan was, they ran into serious fiscal difficulties, and must allow negative nominal rates eventually.

Meanwhile, in Canada, selected treasury bill yields have fallen below the target rate.

disabledvet's picture

Massive DEFLATION. will work. But not for anything with more than ten employees. The last time the dollar shortages could be met. How will it work this time?

FranSix's picture

If you have negative nominal rates, then there so happens to be one money-market commodity which you can rely on in a pinch for short term stores of value, without even having to take delivery.  And, if need be, you can take delivery and store the bullion bars in a bank, because its a monetary asset.

1835jackson's picture

Money For Nothin' And Chicks For Free

JackT's picture

I like the "HELP for Explanation" at the top

mikla's picture

Translation:  Switzerland is "being-paid" to issue debt, so Switzerland can "make-lots-of-money" by "borrowing-more-money".  (Weird, and counter-intuitive.)

Typically, a government "borrows-money" by issuing bonds.  To borrow, the government must agree to "pay-interest" for that privilege (e.g., it "costs-something-to-borrow").

However, the "negative-interest-rate" we see today shows that people holding Euros are scared:  They are willing to pay Switzerland for the privilege of loaning-their-money to Switzerland.  This is because they are "selling-Euros" to "buy-bonds-denominated-in-(Swiss Francs)-CHF", because they trust the Swiss Franc more than they trust the Euro, and they are willing to "lose-money" to do it.  (People are "divesting Euros", and Switzerland is making-a-profit as people are willing to lose-money to buy CHF.)

The result:  Switzerland is literally "making-money-by-borrowing-money".  Under this scenario, if Switzerland "borrowed-infinite-money", then it would be "infinitely-rich", and it could use those profits to pay off all debts, have great parties, and purchase empty-cities throughout Asia.

prole's picture


We could have done the same thing, but instead "we" decided to send all the money to a precious little country somewhere else, so we could go bankrupt.

Cursive's picture

I will gladly pay you 10 Euros today for 90 Swiss Francs tomorrow. 

Jack Sheet's picture

That's about 3 hamburgers