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Killer Bunny

Swiss Nat Bank Ends Peg To Euro!

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Crazy day today so far

eur/CHf traded as low as .85 now 1.05

gbp/chf traded as low as 1.00 now 1.35

usd/chf traded as low as .75 now.88

rates market has frozen

usually first moves as stops are taken out are the most violent - now it's started to settle down a bit

retail banks are not making prices - just tried to buy USD and GBP - they refused to quote - too volatile

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Crazy day today so far

eur/CHf traded as low as .85 now 1.05

gbp/chf traded as low as 1.00 now 1.35

usd/chf traded as low as .75 now.88

rates market has frozen

usually first moves as stops are taken out are the most violent - now it's started to settle down a bit

retail banks are not making prices - just tried to buy USD and GBP - they refused to quote - too volatile

So do I need to stock up on beans then?

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Crazy day today so far

eur/CHf traded as low as .85 now 1.05

gbp/chf traded as low as 1.00 now 1.35

usd/chf traded as low as .75 now.88

rates market has frozen

usually first moves as stops are taken out are the most violent - now it's started to settle down a bit

retail banks are not making prices - just tried to buy USD and GBP - they refused to quote - too volatile

Yep, the EUR/CHF and GBP/CHF markets must have temporarily gone bidless!

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I think the 20+% move in the CHF is more the story here. I sense a bunch of hedgies queuing up to go bust......

Remember the Swiss franc mortgage?

Shaun Richards 12/12/13

'Back in the days before the credit crunch something called the carry trade developed. This was caused by the fact that the Japanese Yen and the Swiss Franc had much lower interest-rates than seen elsewhere. It was not long before it occured to some that one could borrow in these countries and currencies and pay a lower rate of interest than at home. Often a much lower rate of interest. This later spread from professional investors to those taking out a mortgage mostly in Eastern Europe. So the carry trade began and the effect of this was to make this borrowing seem like a Midas touch trade. The reason for this was that borrowing in a currency is the same as selling it and the size of the various carry trades was such that both the Japanese Yen and Swiss Franc were pushed lower. This meant that not only was the interest-rate cheaper but that there were apparent capital gains too.

Hungary

The largest amount of Swiss Franc borrowing took place here. I do not know if bank salesmen and women were more aggressive and reckless here than elsewhere or their customers were but the numbers are extraordinary. According to the Magyar National Bank of 5.4 trillion Forints of mortgages in Hungary some 3.5 trillion Forints worth are in foreign currencies (or 1.8 million mortgages out of 3.3 million) with the majority being in Swiss Francs. Of course the rise in the Swiss Franc made a bad problem worse in terms of size.

According to the MNB the banking sector has 79,000 non-performing foreign currency loans to a value of 709 billion Forints. There are “significant numbers” elsewhere at non-banks too according to it but it does not estimate them.This is inspite of the fact that it has tried to help by cutting interest-rates from 7% at the end of 2011 to 3.2% now with the latest reduction being on the 27th of November. Also the Hungarian government has an exchange rate cap scheme which has been joined by about half the borrowers although this has an element of can kicking baout it as the problem is deferred for either five years or to mortgage maturity. Still the politicians will have moved on by then….

This has had a severe impact on bank lending to households.

Loans outstanding continued to decline in the household segment. In Q3, loans outstanding fell by around HUF 100 billion, corresponding to a 5.2 per cent annual decline.

Also whilst the MNB has cut rates take a look at what the consumer is still paying!

The APR on actual transactions fell to 9.3 per cent in the case of housing loans, and to 11.5 per cent in the case of home equity loans,

If you think that these interest-rates are high then look away now as unsecured loans cost 26%! Isn’t this supposed to be the era of zero interest-rates?

So if we treat the recorded non-performing mortgages as the tip of the iceberg we see that the issue is a a big one amongst Hungarian borrowers which makes it one for banks in Hungary which makes it one for the Hungarian economy.

For a typical Swiss Franc borrower their mortgage has risen by 50% as have the monthly repayments.

Cyprus

Only yesterday I discussed the economic crisis in Cyprus where pretty much everything is pointed downwards. Yes Swiss Franc mortgages were taken out here too and a familiar tale follows. Monthly repayments have gone from being based 2% over Libor to more like 4% over it and of course the capital debt has rsien in Euros too. Just to complete an incredibly toxic mix house prices have fallen by around 25% and apartments by a third over the credit crunch in what is the mortgage equivalent of a perfect storm.

In a small country like Cyprus some 3.722 billion Euros worth of Swiss Franc borrowing is quite an issue is it not?

Croatia

The estimate for Croatia not far short of 100,000 people took out Swiss Franc mortgages for a total amount just short of 2 billion Euros (15 billion Kunas). There is a difference to this tale as borrowers seem to have gained some traction in the legal system there. But in the end someone will have to take the losses.

Poland

Yes here too! At the start of the credit crunch around 70% of all mortgages in Poland were in foreign currencies and this has improved but is still high at 54%. Also the Polish central bank (NBP) has pointed out this.

High Loan-to–Value ratio loans, with Swiss franc-denominated loans prevailing, have a big share in banks’ loan portfolios.At the end of 2012, the share of housing loans with LtV ratios exceeding 100% and 80% could be estimated at slightly over a 1/4 and half the portfolio respectively.

Poland has legislated to try to stop this happening again but the situation remains very risky to my mind. For all the NBP’s talk of the loans being affordable (sound familiar?) there are risks for the borrowers the (mostly foreign) banks who lent them money and for the overall Polish economy. Even it has to admit that the loans have become between 17% and 27% more expensive at a time when interest-rates are supposed to be lower. After all it has cut Poland’s reference interest-rate from 6% to 2.5%.'

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The more leverage the central bank cocksuckers inject into the system the more banks / hedge funds lever up and gamble and the more distress/failures and shit will go down.

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The more leverage the central bank cocksuckers inject into the system the more banks / hedge funds lever up and gamble and the more distress/failures and shit will go down.

The old "sell EURCHF put option and collect risk less premium" crowd just got fked big time

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So do I need to stock up on beans then?

difficult to say - most people are shocked they abandoned it just 2 weeks after they declared they had unlimited means to defend the floor

one theory is that the ECB told them about the size and extent of their planned QE, they realised they wouldn't be able to defend the floor so pre-empted the move by free floating CHF now and letting it find its equilibrium level prior to ECB action

if you work in the export sector I would be worried

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Nestle share price down 7%.

Any company with large foreign earnings has just had all their books/earnings rebased on the expected CHF appreciation (for the timebeing) - on the assumption no way in hell they will be able to vary foreign product pricing to match.

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difficult to say - most people are shocked they abandoned it just 2 weeks after they declared they had unlimited means to defend the floor

one theory is that the ECB told them about the size and extent of their planned QE, they realised they wouldn't be able to defend the floor so pre-empted the move by free floating CHF now and letting it find its equilibrium level prior to ECB action

if you work in the export sector I would be worried

Or they didn't want devaluation, relying heavily on finance. Or they were worried about being lumped in with the Euro at a wider level for other reasons.

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Perhaps they know that there will be no Euro QE and realise that the Euro is about to crash further?

More QE, dilution, less QE more obvious how much trouble EU in, Grexit etc. All seems a bit negative and disentanglement early rather than later a smarter move.

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Swiss St mkt down 8% as C Bank ends policy they shouldn't have had in the first place. Marxist PHd disingenuous twerps. Always wrong.

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if you work in the export sector I would be worried

Biggest fallacy going. Even bigger than QE pumps up stock markets.

Deflation HELPS exporters as import/input costs fall. Look at Japan last 20+ years.

What about Germany for 50 years under DM?

On other hand look at manufacturing in UK and Italy over decades. Devaluation CRAP for exporters.

Not immediately I grant you.

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