Swiss National Bank
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Swiss National Bank
Our Core Thesis: European leaders have successfully implemented austerity, disallowed notorious wage increases in the periphery and nearly introduced deflation. Inflation differences between the euro zone and Switzerland will decrease to zero, Swiss inflation might even be higher in some years. With time, the remaining slight CHF overvaluation will shrink to zero but the EUR/CHF will remain close to 1.20. Risk-off flows will not leave Switzerland, but they will be converted into risk-on flows (stocks and real estate) thanks to high immigration and higher Swiss GDP growth. In some years strong global growth and high German wage increases will boost inflation in Germany and Switzerland but Southern Europe will still struggle. At that moment the SNB will need to hike interest rates - before or in line with the ECB and the EUR/CHF will fall under 1.20. The consequence for monetary policy will be:
  1. Either the SNB fights inflation and the Swiss real estate bubble, allows a CHF appreciation and sells reserves below the price of EUR/CHF 1.20 or
  2. Switzerland accepts higher inflation and consequently gives up its competitive advantage in lower inflation and lower borrowing rates. The latter scenario was excluded by the SNB's Thomas Jordan already in 1999 when he pledged against a euro membership. The SNB mandate explicitly disallows inflation.
The first scenario, namely that the SNB sells reserves below EUR/CHF 1.20 is therefore the only feasible solution. Whether the SNB suffers a big loss depends on the income it can generate in the meantime. In regular posts we show how the Swiss CPI comes closer and closer to euro zone inflation. One day, maybe in 10 or 20 years, the Swiss franc will depreciate more strongly, but this will be only after the bust of the Swiss real estate bubble.
Curated by George Dorgan
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2013 Estimate: SNB Gains 10.8 billion CHF on Stocks, but Loses 30 bln. on Gold, FX and Bonds - SNBCHF.COM

2013 Estimate: SNB Gains 10.8 billion CHF on Stocks, but Loses 30 bln. on Gold, FX and Bonds - SNBCHF.COM | Swiss National Bank | Scoop.it
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SNB Balance Sheet Expansion -SNBCHF.COM

SNB Balance Sheet Expansion -SNBCHF.COM | Swiss National Bank | Scoop.it
The following graph from UBS shows how the SNB has increased both assets and liabilities, its balance sheet expansion.
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History of SNB Sight Deposits -SNBCHF.COM

History of SNB Sight Deposits -SNBCHF.COM | Swiss National Bank | Scoop.it
Update March 8: Increase of other sight deposits (companies, or Swiss state) by 2.5 bln. CHF, decrease of deposits of local banks by 3 bln.
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SNB's IMF data: FX reserves & more -SNBCHF.COM

SNB's IMF data: FX reserves & more -SNBCHF.COM | Swiss National Bank | Scoop.it
This IMF data on the SNB website shows SNB Forex and gold reserves in the last month. It is so-called "IMF Special Data Dissemination Standard (SNB Data)"
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SNB has Won the Risk Aversion Battle, When Will the Inflation Battle Start? - SNBCHF.COM

SNB has Won the Risk Aversion Battle, When Will the Inflation Battle Start? - SNBCHF.COM | Swiss National Bank | Scoop.it
With weaker emerging markets and stronger U.S., the SNB has won the first battle against financial markets. We judge that until the second battle, the "inflation battle" starts, some years will pass.
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A Nationalization of Swiss Foreign Assets? SNB Owns 56% of Swiss Net International Investment Position - SNBCHF.COM

A Nationalization of Swiss Foreign Assets? SNB Owns 56% of Swiss Net International Investment Position - SNBCHF.COM | Swiss National Bank | Scoop.it
The SNB currently owns 56% of the Swiss net international investment position (“NIIP”). In the year 2007 this number was only 12%. Is the central bank implicitly nationalizing the Swiss international companies?
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Parallels between European and SNB Leaders

Parallels between European and SNB Leaders | Swiss National Bank | Scoop.it
Similarly as European leaders knew what they were doing with the euro, namely introducing a not feasible currency, Swiss National Bank did between 2005 and 2008, namely the absolutely wrong thing.
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The "Get Stress in May and Relax in October Effect" for the SNB

The "Get Stress in May and Relax in October Effect" for the SNB | Swiss National Bank | Scoop.it
The U.S. economy regularly improves between October and March. The SNB should use the moment to sell some currency reserves. From May on, the typical seasonal effects will push the SNB into a defense.
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Composition of SNB Reserves Q3/2013 SNBCHF.COM

Composition of SNB Reserves Q3/2013 SNBCHF.COM | Swiss National Bank | Scoop.it
We regularly publish the SNB asset structure by currency, rating & duration, might be a template for the tactical asset allocation for other fixed income and/or rather conservative asset managers.
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Target2 and SNB Currency Reserves. It is All the Same Concept - SNBCHF.COM

Target2 and SNB Currency Reserves. It is All the Same Concept - SNBCHF.COM | Swiss National Bank | Scoop.it
We show that Target2 imbalances and the SNB currency reserves represent the same issues, namely current account surpluses/deficits and capital flight.
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Rising Sight Deposits at SNB Means Rising SNB Debt

Rising Sight Deposits at SNB Means Rising SNB Debt | Swiss National Bank | Scoop.it
The financing of SNB currency and gold reserve purchases is currently realized by increasing SNB debt to local and international banks and companies, commonly called "money printing".
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SNB Remains the Only Central Bank Currency Warrior; the Japanese do not Fight, they Talk - SNBCHF.COM

SNB Remains the Only Central Bank Currency Warrior; the Japanese do not Fight, they Talk - SNBCHF.COM | Swiss National Bank | Scoop.it
Central Bank data show that the Swiss National Bank (SNB) remains the only central bank that strongly participated in currency wars with FX intervention, while the Japan was just verbal intervention.
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SNB's history of balance sheet: Monthly bulletin -SNBCHF.COM

SNB's history of balance sheet: Monthly bulletin -SNBCHF.COM | Swiss National Bank | Scoop.it
The SNB monthly bulletins contain all important data of the SNB and the Swiss economy as of the latest quarter.
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Our Detailed Estimate of SNB Q2 Results: 17 Billion Francs Loss, The Reality 18 Billion - SNBCHF.COM

Our Detailed Estimate of SNB Q2 Results: 17 Billion Francs Loss, The Reality 18 Billion - SNBCHF.COM | Swiss National Bank | Scoop.it
Loss of 3.4% or 17.3 billion francs for the Swiss National Bank in Q2/2013. Gold: 11.7 billion losses, government bonds 6.2 bln., cash 1.4 bln. losses, gains of 1.2 bln. CHF from equity investments.
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History of SNB monetary policy assessments vs. GDP/GNI -SNBCHF.COM

History of SNB monetary policy assessments vs. GDP/GNI -SNBCHF.COM | Swiss National Bank | Scoop.it
History of SNB monetary policy assessments vs. the Swiss gross national product (GDP) and gross national income (GNI).
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IMF Sees Considerable Risks on SNB Balance Sheet - SNBCHF.COM

IMF Sees Considerable Risks on SNB Balance Sheet - SNBCHF.COM | Swiss National Bank | Scoop.it
The IMF judges that the SNB's net revenue is subject to large fluctuations. Sizable losses could occur if a CHF appreciation was to take place before foreign exchange interventions were unwound.
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SNB Results: Will SNB FX Investments Yield Enough Until Inflation Starts? - SNBCHF.COM

SNB Results: Will SNB FX Investments Yield Enough Until Inflation Starts? - SNBCHF.COM | Swiss National Bank | Scoop.it
We repeat the SNB results under a different perspective: focus on income and yields for foreign exchange position and gold and find out if the SNB makes enough income to survive a franc appreciation.
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Why the SNB Will not Imitate Hong Kong, but potentially Singapore

Why the SNB Will not Imitate Hong Kong, but potentially Singapore | Swiss National Bank | Scoop.it
The SNB will not be able to realize a fixed currency peg over the long-term. The consequence would be that Switzerland loses its competitive advantage, lower Swiss rates, if it follow euro inflation.
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