Credit Suisse and UBS Will Charge Negative Interests Above a Threshold

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George Dorgan
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Credit Suisse and UBS will charge negative interests for cash clearing clients above a threshold. Last year such news was worth 250 bps, on December 3 only 28 bips.

One remembers August 26, 2011, when UBS only spoke of negative interests and consequently EUR/CHF rose from 1.1420 to 1.1688. At the time FX traders and speculation were the main drivers of the EUR/CHF.

“After record demand for the franc, UBS said it was monitoring franc cash balances in the current accounts of its franc clearing customers. The news helped the euro climb more than 2% against the franc to a one-month high .” source

Now both CS and UBS seem to be really introducing negative interest rates on clearing customers. But the result on EUR/CHF is a very, very poor improvement from 1.2059 to 1.2090.
This means that most FX traders are out of this pair, they have been deceived too many times going long EUR/CHF. Clearing customers are for us mid-term money, with a horizon a bit higher than FX traders.
You can imagine where the fair value models of big investment banks currently price the EUR/CHF, if even such important news do not give a strong push to EUR/CHF. See the official news at FT Alphaville

Update December 04

FX traders have understood the importance of negative interest rates on big clearing account balances. Like usually they overweigh the importance that some clearing accounts have when compared total CHF investments.

But there might be other factors.

Someone just mentioned to me, this strategy suits perfectly SNB ..or may be this is the CB using CS and UBS as submarine to weaken the CHF

— Steve Collins (@TradeDesk_Steve) December 4, 2012

About George Dorgan

George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

My articlesMy siteAbout meMy books
Follow on:LinkedINTwitterSeeking AlphaCFA SocietyEconomicBlogs