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Swiss Nat Bank Ends Peg To Euro!


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and dollars. over several years using money they printed

USD/ChF only back to its level 1 yr ao.

Also, dont forget the corollary - What happens if SNB continues to buy Bunds as Euro plummets (if it does) after QE? and the benefits accrued during the period on the peg. Peg was for a reason.

You cant just take nominal value on Weds v nominal value next day and conclude anything. Why do people just repost nonsense they read on the web as FACT.

but the snb is sitting on a pile of euro bonds that will rise in value in a ecb qe, and the snb are almost fully recovered in the chfusd. Good trade, eh?

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but the snb is sitting on a pile of euro bonds that will rise in value in a ecb qe, and the snb are almost fully recovered in the chfusd. Good trade, eh?

I trust you're joking.

Once again, QE reduces price of Govt Bonds. Ending QE raises!

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If bunds/other ez bond prices are where they are in anticipation of qe, they'll fall in value in an ECB qe. Until they likely rise again later.

it may be priced in, but QE in the USA caused bonds to rise for years. They are still rising even as the QE moved to Japan

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Bloomberg:

“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”

Oh dear.

Lol. Central banks are not your BFF's Nick. ;)

Now who's feeling lucky about Draghi's 'Whatever it takes' promise?

Who trusts that there really are no plans for a Grexit?

Who's ready for Russia to implode?

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Bloomberg:

“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.

Oh dear.

Lol.What a dick!

Short o/t post, but I can not resist. That's hilarious (above), and flows with what I expect to be some unexpected and unusual reactions from UK outright/equity rich owners into a real HPC where they can not avoid but recognise their prime homes have fallen sharply in value.. and are set to remain at much lower price levels

Whereas it seems a slight majority believe such equity rich home-owners would roll easily (some will for sure) with a major low-mid-high prime HPC without being upset/shocked / keeling over with their coarse world view shattered. I'm with DWS... not for all owners, but it we'll see some stroppy reactions and major scapegoating, which I am looking forward to.... unless the excuse-givers and PTB give in (again) to kissing it all better for them with easy money forbearance (nothing for bears in 'forbearance') (etc).

What Reaction To Expect, From Equity Rich House-Owners, In Prime Areas, To Sudden And Sharp Losses Of Housing Peak Value Wealth, In Hpc?

January 2015

Why on earth wouldn't equity rich/outright owners just shrug their shoulders and go "oh" ? It's not like a crash would materially reduce their standard of living in any way.

Don't know too many boomers with motgages, so exactly. Can only really see a problem if gold plated final salary pensions start getting haircuts, Greece style, or there is a major change in pensioner welfare provision. And hell would freeze over before any of that happened.

Ditto.

Plenty will not be remotely bothered. Plenty have not MEWed, and never will. Some will be positively pleased if prices drop, since it will benefit their children.

There will be some very strange and internal shifts in their being, which will manifest in all sorts of weird ways which even the DM won`t be able to provide an outlet for. Think "The Wicker Man" or early Genesis with Peter Gabriel, running around with a foxes head on, beating the wife, and screaming to the Gods of Suburban Nimbyism for more QE.

:lol::lol::lol:

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Eh?

I don't care what they were 'supposed' to do. The facts are what they 'did'.

QE has ended. THAT is why yields are at ATLs. You appear to be self-contradicting.

I'm not an expert, but QE has surely not ended. AFAIK, they haven't sold any of the assets back yet, which is what the central banks claim they will do.

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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%.'

Thanks for the information about this which is very useful. I note that the same source provided an update on these matters yesterday.

For the Euro area and the European Central Bank we have plenty of consequences to consider as that project has clearly had considerable adverse effects for Switzerland. I have summed it up on twitter thus.

Dear European Central Bank what have you got now? Signed the Swiss National Bank

For those with foreign currency mortgages denominated in Swiss Francs in Eastern Europe then this is something of a shocker. Whilst they may see interest-rate cuts many of these adjust for the capital debt which has just shot higher. So monthly payments may shoot up again. Hungary has made moves to meliorate this but that may just simply shift the pain to (Austrian and Italian) banks and the state.

https://notayesmanseconomics.wordpress.com/2015/01/15/switzerland-takes-the-nuclear-option-in-the-currency-wars/

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it may be priced in, but QE in the USA caused bonds to rise for years. They are still rising even as the QE moved to Japan

If it's priced in then why would they rise - can't price in the same event twice. The issue will be how big any qe will be if it happens - ie. beyond current expectations or not. Differing views on all this. My opinion is if ECB goes for it then those who bought EZ bonds at higher yields in anticipation say thanks very much, sell and put proceeds in riskier stuff to play the game. Until that doesn't work either and it starts again. So yes QE lowers yields but not on an equivalent timing basis. A fair counterfactual asks where would yields have gone absent any QE anywhere. I think even lower, many disagree.

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If it's priced in then why would they rise - can't price in the same event twice. The issue will be how big any qe will be if it happens - ie. beyond current expectations or not. Differing views on all this. My opinion is if ECB goes for it then those who bought EZ bonds at higher yields in anticipation say thanks very much, sell and put proceeds in riskier stuff to play the game. Until that doesn't work either and it starts again. So yes QE lowers yields but not on an equivalent timing basis. A fair counterfactual asks where would yields have gone absent any QE anywhere. I think even lower, many disagree.

make that : "the announcement of QE is priced in". Can't price in the entire QE period before its started. As we saw in the years of QE in the UK/USA. And the CBs periodically jawbone rate rises , presumably to shake out some more bond supply to perpetuate QE. And when they run out of supply , hell they may even naked short fresh supply out of thin air. When you own the printing press there is not much you cannot achieve , in the short run. In the long run it all falls apart.

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Who will be the new West Ham sponsor?

Currency broker; seemingly upset by market move that appears to have not be anticipated by them, giving big advantage to winners on the opposite side of the trade (such as Swiss Francs holders 'dead money not earning anything in the bank' / 'sock draw'). Idiotic lol.

Alpari blamed its problems on market volatility. “The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity,” said Alpari, which signed a three-year deal with the football club in 2013 worth £3m a year.

“This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency,” it said. It said that any funds held on behalf of clients were kept in separate accounts as required by rules imposed by the Financial Conduct Authority.

Analysts at Alpari had described the decision by the Swiss central bank to stop holding its currency at €1.20 as “idiotic” in the immediate aftermath of the move on Thursday which took the markets by surprise.

http://www.theguardian.com/business/2015/jan/16/west-ham-sponsor-alpari-swiss-currency-crisis

Barry Sternlicht Warns "Everyone Is Holding Cash Because They Know When It Ends It's Gonna Get Ugly"

Submitted by Tyler Durden on 5 November 2013

...The outspoken CEO of the $29 billion fund, noted "all my friends who are money managers.. are much closer to the sell button than they ever were before," adding that "everyone's holding cash," since if they start to get nervous "volatility will come back instantly." Simply put, he concludes, "you know when this ends, it's gonna get ugly."

Further to Sternlicht's point that "you're gonna hold cash",

A new survey of family offices by Citi finds that the wealthy are cash heavy—meaning they may fall short of the investment returns they're expecting. Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

Edited by Venger
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make that : "the announcement of QE is priced in". Can't price in the entire QE period before its started. As we saw in the years of QE in the UK/USA. And the CBs periodically jawbone rate rises , presumably to shake out some more bond supply to perpetuate QE. And when they run out of supply , hell they may even naked short fresh supply out of thin air. When you own the printing press there is not much you cannot achieve , in the short run. In the long run it all falls apart.

I referred to 'current expectations'. I'm not sure how what you wrote addresses what I said, or the price vs event history, but let's see.

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The lesson of Alpari (and the other brokers losing in aggregate £00s of Ms) is

Rule #1: DON'T TRUST C BANKS

Rule #2: See #1

I tell you, with Oil and CHF, I'm actually starting to wonder if we have seen the start of 2008.2 - which like all Hollywood sequels will be bigger than the original.

That rule. Exactly. Too many market participants seem to think the entire market is like that episode of Battlestar Galatica, the happy casino where everyone wins, CB's tell you what to do to make money... etc etc. They all come out a winner patting themselves on the back. Then the elevators leading out of the casino take them down to the basement, where they meet the Casino Operators/Central Bankers and after being paralysed, discover their real intentions....

Don't be surprised when Central Banks turn, both them and Gov blame factors beyond their control, a shift that totally forgets what they said before (imo), or new people in... ever more younger and unhappy priced out professional press for change from inside the institutions. CHF = deflationary trigger. Maybe...

zqp5.jpg

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The lesson of Alpari (and the other brokers losing in aggregate £00s of Ms) is

Rule #1: DON'T TRUST C BANKS

Rule #2: See #1

I tell you, with Oil and CHF, I'm actually starting to wonder if we have seen the start of 2008.2 - which like all Hollywood sequels will be bigger than the original.

I'm with you there,the repercussions of this will only become apparent over time.

Certainly a lot of loans to small explorers are starting to look uncollectable and the unwind from the NSB action will be working through the system for weeks/months.

'Analysts at Alpari had described the decision by the Swiss central bank to stop holding its currency at €1.20 as “idiotic” in the immediate aftermath of the move on Thursday which took the markets by surprise.'

Must have been surreal for them....

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http://www.telegraph.co.uk/finance/economics/11347894/Swiss-franc-shock-triggers-mortgage-panic-for-wealthy-homeowners.html

One for Libertas - broker quoted at the bottom says that Swiss people buying property in London which is suddenly cheaper will NOT be enough to stop the slowing London property market.

Also, confirmation that a lot of people are going to hit by the impact on Swiss denominated mortgages - including Russians

Russians must be suicidal by now: first the rouble loses half its value, then their economy collapses - thank you America! - and now their CHF mortgages cost 30% more overnight. I think there are major defaults coming down the pipeline.

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'Analysts at Alpari had described the decision by the Swiss central bank to stop holding its currency at €1.20 as “idiotic” in the immediate aftermath of the move on Thursday which took the markets by surprise.'

Must have been surreal for them....

Every link I tried on their ALPari website, from their home-page on, leads back to this.... which would have annoyed me if my broker closed up, if I had open positions/net-equity with them on other markets.

Maybe the company, or its administrators, can pursue those who owe it money?

Never heard of them before... only knew of MF Global because I think that was the firm who somehow got my mobile number and twice tried to suggest I open an account... or very similar sounding broker, who gave it the big "offices in Canary Wharf" sell. My account is with one of the larger companies, which itself was just bought out by another company recently... maybe sign of a top/future volatility, or maybe just plain wanting to retire by main part older owner... they had enough volatility 07-08

Michael Spencer sells City Index to US rival for $118m. 31 Oct 2014.

140f8ef.jpg

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... Most of my earnings are still sitting in my Swiss savings account (still paying interest too). I should be happy but all this volatility makes me nervous....

I wonder if the opaqueness and unexpectedness was a conscious decision. Traditionally central bank openeness was a tactic to keep the markets calm and foster support for the currency. Although the decision has increased the value of the franc, that was in fact inevitable. In the long term, such erratic behaviour should make the franc less attractive, i.e., there is now a larger risk premium to be paid for holding it.

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2/2...but "the minimum exchange rate will be the focus of monetary policy implementation for the foreseeable future": http://www.snb.ch/en/mmr/speeches/id/ref_20140116_tjn/source/ref_20140116_tjn.en.pdf

  1. 1/2 Speech from Thomas Jordan, SNB boss, from a year ago: "Sometimes transparency can be counterproductive"....

Market participants not paying attention?

Same as "Euro is irreversible"?

just saying

Edited by R K
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