This page has been archived and commenting is disabled.
Renewed European Fears Send CHF Soaring, Force Swiss National Bank To Defend EURCHF 1.20 Floor
And like that, Europe is broken again. Following a spate of negative European data (what else is there), including a miss in German industrial production as well as a miss in UK manufacturing output, all eyes are again on Spain, especially those of the bond vigilantes, who have sold off the sovereign European bond market, sending the Spanish-Bund spread to over 400 bps for the first time since December 2011. The main reason today: a Goldman report saying Spain will unlikely meet its 2012 and 2013 budget targets, as well as JPM Chief Economist David Mackie saying Spanish government "missteps" have raised questions about its credibility, making investors reluctant to purchase Spanish debt. Stress has returned to periphery, if it broadened into bank funding markets more LTROs would be forthcoming; if that “failed to hold yields at an appropriate level” Spain may need assistance from the EFSF/ESM and the IMF. Euro area unlikely to return to stability in sovereigns without some burden sharing; nominal growth likely to stay below borrowing costs, making fiscal targets “all but impossible to achieve”. UBS piles in saying Spanish banking stresses still haven't been addressed. Finally, a big red flag is that market liquidity is once again starting to disappear, and as Peter Tchir points out, Main is now being quoted with 3/4 bps bid/ask spread, all the way up to 1 bps spread. In other words, as we have been warning for weeks, the period of fake LTRO-induced calm is over, and the market is demanding more central planner liquid heroin. The question becomes whether Europe has even more worthless collateral in exchange for which the ECB will continue handing out discount window money in sterilized sheep's clothing. Yet nowhere is the resumption in risk flaring more evident than in the Swiss Franc, where the EURCHF all of a sudden broke through the critical 1.20 SNB floor, which was set back in September 2011, the day gold was trading at its all time high. Said otherwise, everyone is once again scrambling for safety. And since they can't get it in the CHF, it is only a matter of time, before gold resumes its ascent as the paper currency alternative that sent it to its all time highs late last summer.
Oops:
Needless to say, the FX trading specalists at the SNB, and its bosses, whoever they may be in Hildebrand's absence, have said they will defend the floor with all they have. Keep a close eye on the EURCHF.
Bank of America summarizes the remainder
Market action
Asian equity markets finished mixed. Starting with the markets that finished higher we have the Shanghai Composite up 1.7% and the Korean Kospi climbing 0.5%. On the flip side, the Japanese Nikkei lost 0.5% while the Hang Seng lost 1.0%. The Indian Sensex was closed today.
Spain is in the spotlight after yesterday's government bond auction had less demand than was expected. Investors are nervous about the country's economic growth prospects. Rising fear is helping send European shares down 0.4% in the aggregate. Blue chips are underperforming the broader market, down 0.6%. At home, futures are pointing to the third consecutive sell off in a row. The S&P 500 is set to open down 0.1% after falling 1.0% yesterday.
In bondland, Treasury yields are backing up marginally. The 10-year and the long bond are both up 1bp to 2.23% and 3.37% respectively. In
Europe, the UK gilt is down 2bp to 2.19% and the German bund is flat at 1.78%.
The dollar is up marginally in the currency markets with the DXY index 0.1% higher. Commodities are trading higher. Gold is $4.85 an ounce higher at $1,625.53 and WTI crude oil is up 60 cents to $102.07.
Overseas data wrap-up
Despite the Netherlands officially entering a recession by contracting for two consecutive quarters, inflation remains sticky. Inflation in the Netherlands rose by 2.9% yoy in March, matching the prior month's increase. Normally, a contraction in output should put downward pressure on prices; however, the recent run up in Brent oil prices by $12 a barrel since the end of January is counteracting the normal macroeconomic drivers of inflation.
UK manufacturing output fell 1.0% MoM in February: notably below market expectations of a small 0.1% rise, with declines in output reasonably widespread across industries. The unexpected weakness of this data may pare back sentiment somewhat after all of the manufacturing, services and construction PMIs had surprised on the upside earlier this week.
Today's events
The only thing on the economic calendar today is the release of the initial jobless claims report at 8:30 am. The market is looking for claims to fall marginally to 355,000 for the week ending March 31 from the prior week's level of 359,000.
»
- 8747 reads
- Printer-friendly version
- Send to friend
- advertisements -
If this goes on the Swiss economy will start to think about switching over to the EUR.
Having a small currency is hard during great devaluation waves... simply too much free money for speculative attacks available
The swiss are not stupid. Whatever get's lost in their currecny by devaluating is invested into other assets.
They've got about 200 years of tradition to defend ;)
I hope you are right - though if you listen to conservative Swiss, those "other assets" are chiefly EUR
and the Swiss economy is highly integrated in the eurozone - buy Swiss engineering parts and you'll get EUR prices quoted
Switzerland has two soft spots: Credit Suisse and UBS - two transnational giants that are also Primary Dealers
Good point. However, apparently, most of their liabilities are housed within the US entities and would become a problem for the US taxpayer if you ever got "armageddon".
Secondly, UBS and Credit Suisse can always be bailed out by the Swiss Government which has now built up a massive hoard of EURs and USDs because of their Swiss Franc policy. Of all the European institutions, the Swiss banks are the least vulnerable for this reason.
Been wondering when this peg will break. I bet a lot of players are betting on it, as you can lever 40:1 and still be market neutral (go long the CHF, short the EUR) until... BOOM.
Perhaps they are hoping the EUR devaluation will make it easier to bail out their banks?
That would be stupid as it would bring the Swiss Central Bank into ECB orbit and make the German Tax Officials very powerful nin squeezing Swiss Banks. Why the Swiss would want to surrender sovereignty to the ECB when they did not do so to Adolf Hitler is something for you to ponder. They can easily peg the CHF to a basket of currencies with a weighted Dollar/Euro/Renminbi load or simply to SDRs. There is no logic ina bilateral peg at all.
During Hitler's time, policy makers at least knew fascism existed. Nowadays, they don't even know they are fascists themselves. That's a big difference.
No, they Swiss most certainly will not.
They are very aware of their place in the European turmoil, and they are guarding their economy with relatively great care compared to the rest. Public opinion is such that every even talk of steps towards more integration and weakening of their sovreignty causes an oproar, which is isn't seen in the rest of the degenerate continent.
Swiss Army Knife through butter
Italian stock market not looking so good today
It's just a soft patch in the SWAMP called EUROPE!
It's the sinkholes, quicksand and the killer mosquito's that suck the lifeblood out of you that you need to worry about...
chuckle :)
plenty of holes in a Swiss cheese too, try to funnel as much Swiss Francs through the holes as you can while the goings still good (CB subsidised)
Pivot the magnets...
There's something missing in this picture...
The drive who's pissing in the wind!
Buhaha love it!
And so the central bankster muppets will bring out the only tool they have - the hammer of the printing press.
Donkey show is the new clown show.
Muppet show is the new donkey show.
Someone is looking forward to BTFD in Italy...can actually get strategic companies at a very discounted price...To me it looks like 1992 wash rinse and repeat...also Draghi was dismissing Italy's best assets back then.
.
If Goldman said they will miss isn"t that bullish for Spain to hit their budget target?
Can i thank the Swiss Central Bank for continuing to keep SwFr so stupendously low as i add to my stack of delusionally under-priced cash from their country
please continue your utterly futile efforts (as every CB policy ever was) and subsidise my continued purchases ...if you don't run out of other peoples money do please try to keep this going to the end of 2012 if you'd be so kind
Many, many, many thanks
I hope you keep being right in this. It's SFr or CHF, btw.
yes CHF, thanks for the correction
i just say "Swiss Francs" when i order some more, and i think i'll order some more as the King Canutes of Central Banking pitch tents on the shoreline and try to order back the tide
their delusion, our time for fun on the beach :)
You're buying actual CHF, as in the crinkly paper fiat stuff?
Or going long some CHF currency pair?
Hmmm you have me thinking now, dont they have a 1000chf paper note?
pure cash purchases
regards going long or short i should imagine every Forex trader on the planet is now lining for the inevitable crushing of the Swiss Banks utter delusion
not a "crowded trade" probably more like 3,000 migrating wilderbeast being funneled through a phonebox
I like the feel of it. nice work.
It's one of the few ways left for Americans to have a legal "Swiss bank account" and there's no negative (nominal) interest on it either. The only difficulty is actually acquiring the physical currency if you're far from Switzerland.
yes, they have - though I heard that most foreigners prefer the 500chf and 200chf notes
The Swiss ATMs spit out the 200 franc notes. How easy it that?
Do you have any idea of the assets of the Swiss central bank?
yes. I monitor constantly the SNB publications. the short story: gold and EUR, lots of both
What about USD? I heard that they are defending the peg by purchasing both EUR and USD....
nope but i believe their asset base is being depleting at the rate of $2bn a month to keep this moronic tragedy of a policy going
Right when everything starts going so well, reality is showing her filthy paws again.
Total bitch.
Speculators.... they show up every time our economic genuisses press the printing button...
Que ECB Spainish and Italian Bond buying in 3...2....1....
I bet its the wife of the new SNB chairman.
I was wondering where that leathery cow who is proud of her multi-cultural family and insider trading handsome husband fit into all this
she was trading, not her husband - and the deal included a second house sold and another bought
I saw an interview with her at some art show in Singapore, it was posted right here on ZH. She is a bimbo, that's all I need to know. The rest of these Central Bankers and establishment politicians are a bunch of corrupt whores who sell out their fellow citizens so they can flip ski chalets in the swiss alps or apartments on Park Ave and front run everbody else basically. Are you defending them, are you defending her, are you defending their strategy of devaluing their currencies at a faster and faster rate as the mess they themselves have created unravels? Because I think they're beyond my contempt and I wouldn't blame the future mobs one bit if they decide that they're beyond redemption.
The Swiss central bankers are all members of the same criminal club that the rest of CBers are.
While it's probably necessary to keep a lid on the exchange rate to prevent a skyrocketing unemployment rate, if they gave a shit about their Swiss citizens they would be quietly buying gold with all those CHFs they're creating instead of EUR and USD confetti.
Bimbo or not she met her husband while they both worked for a Hedge Fund of dubious ethics and obviously passed the rigorous selection test for a Hedge Fund by having loose morals
Someone is Hoovering up the FRNs right now; porque?
Fuel up the copter!
AND PLAY THE TUNE OF AIRWOLF!!!
TA TAA TAATA TAAT TA TAATA!!
buy Swiss engineering parts and you'll get EUR prices quoted
Yes but that is for invoicing. they even tried to pay workers in Euros but what idiot wants to pay Swiss rents with a currency that is not acceptable to landlords ? Anyway, look at the UK it is perfectly legal to post Corporate Accounts in Dollars or Euros, but noone does because of HMRC.
At some stage GBP - CHF will go to parity. This could happen a lot quicker than people think.
If the economic data coming out of the US was TRUE and was RELIABLE, which it is neither, the world would be in dollars and US debt. But, the world knows the problems here are worse than anywhere else, the only ones who buy into the phony "recovery" con are the American sheepe led by the liars in the media, the propoganda out of DC and the Wall Street sewer. This con game is ending and the Bernanke lies will finally be seen to all as the Federal reserve fraud of the Century.
Anyone amoung you who considers buying CHFs, look at the SNB balance sheet, especially it's growth rate since the announcement of the peg. I'm a (small) shareholder of the SNB, it's ugly.
We also have a huge bubble in the domestic residential real estate market here in Switzerland.
Buy Gold.
True although the Swiss banks never made any "liar loans" and a residential purchase in Switzerland still requires a cash deposit of around 20 percent of the value of the house. Secondly, prices are also pumped up by Arabs and Russians buying a lot of real estate in Geneva and Zurich with cash.
Agree that gold is better than CHF.
1,000 franc notes are easier to pass through airport security than an equivalent number of 1/2 oz coins.