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Weekly SNB Sight Deposits and Speculative Positions

Headlines October/November 2015

October/November 2015: As response to Draghi’s QE thread, the SNB threatens to lower rates further. A big speculative position USD long and CHF short is building up.

October 23: Draghi announces that the ECB could continue QE. Logically the EUR/CHF continued its descend and fell under 1.07. The SNB had to intervene for 1.1 bn. CHF.

October 16: EUR/CHF trends downwards, because US rate hike hopes fade after the FOMC. This implies that rate hike hopes for the ECB fade too. Another 600 million CHF of interventions, this time absorbed mostly by other counter parties.

Sight deposits of Swiss banks rise over 400 bn. CHF. This is 36 bn. more than the 365 bn. on January 22 when negative interest rates of 0.75% were introduced. At the time, the existing sight deposits were not paid, but the delta of 36 bn. costs the banking sector 0.75% per year. Hence it reduces income/GDP by nearly 300 million CHF.

Bad US job data: both euro and CHF rise against the dollar, given that the US rate hike might be delayed to 2016.


Sight Deposits October

Other sight deposits: the ones of non-Swiss banks, institutions like foreign banks, hedge funds or independent asset managers, are falling again after a quick rise after the US job data. They are nearly unchanged since January 22.

Speculative position USD against CHF: Remains long USD despite bad US job data and fading hopes on a rate hike.

End September: Volkswagen scandal 

EUR/CHF rate: EUR/CHF fell with the Greek elections but the euro is rising again. The Volkswagen scandal may weaken the German trade surplus. We know that Switzerland is a proxy for the German economy. Via trading algos this implies some CHF weakness.

September 21

EUR/CHF rate: When FX speculators hear the word “Greece”, then they often sell euros and buy CHF. That the Greek GDP is only tiny part of euro zone GDP does not matter. According to the CFTC, speculators were long CHF and short USD.

September 7

Strangely EUR/CHF continues its ascent on September 7, despite the ECB threat with more QE.

Until End August

Shortly before January 15th, 2015, the speculative position was at it highest. Remember that all such carry trades – a strong speculative position that counters real money, collapse one day. In our view, the carry trade should continue until EUR/CHF reaches 1.10 or 1.15. The carry trade could run 3 to 5 years, before it should collapse again to EUR/CHF 0.90. Time for the SNB to collect some dividends and coupons to avoid a bankruptcy.


July 15th to August, 15th: Sight deposits have risen by 2.5 bn. in the course of one month. But a big speculative position is building up against CHF. Sight deposits do not capture these movements because they are not portfolio investments for the balance of payments. They happen at FX brokers.  But long-term investors still like Swiss stocks.

July 13th: Another 2.1 bn CHF of interventions, a deal with Greece is not yet achieved. Inflows mostly came from local banks  They seem not to fear negative rates. This delta in sight deposits, is probably punished by negative rates. But the SNB seems to be convinced to keep EUR/CHF over 1.04, without considering that many exporters (like pharma and chemicals) take advantage of the stronger dollar.

July 6th: Surprisingly only a small intervention of 1.4 bn. CHF during the Greek referendum week. Reasons might be that the European recovery still avoids inflation. See more in the two phases of CHF appreciation.

June 29th: Greek referendum announced and talks on Greek ended.  According to Forexlive.com, the SNB has intervened. For us, this must have been at the lower area of 1.0312 in Asian trade, but not at 1.04.

June: The pace of SNB intervention is slowing. Sight deposits rise by 0.5 billion francs per week.

April and May: Sight deposits rise by 1.5 billion CHF per week, hence the SNB seems to intervene with a pace of 1.5 billion francs weekly. Recently the SNB increased the loans with the Swiss confederation.

Between Feb 21 and April 3: No major change, no SNB interventions

The biweekly bigger IMF data release will contain infos about money supply, in particular M0, next issue is on May 14th.

The last one, the one for March, is the following:


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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.
See more for 1.) SNB, George Dorgan's opinion

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  1. Newreader

    Hello George,
    thank you for your interesting blog.
    Relating to your “Latest SNB Intervention Update: Weekly Sight
    Deposits” there is one thing I do not understand. What is the interest
    rate on deposits held by commercial banks by the SNB. In other words,
    does it pay the banks to hold money at the SNB or it is better to go to
    the market? Are the SNB’s FX interventions sterilised, if so at what
    rate? Is there any corridor for MM rates in Switzerland? If so what
    rates does it consist of?
    Your response would be very appreciated.
    Kind regards,

  2. GeorgeDorgan

    Sorry for the late response.
    Similar to the Bank of Japan, the SNB has a long tradition of paying zero on its sight deposits, the Fed currently pays a little more.
    With the move into negative rates, sight deposits above a certain threshold must pay negative rates.

    “Better to go to the market” is no alternative, because the LIBOR market is empty. Any Swiss bank has too much money. So if you have money then nobody wants it, even more you must pay to give the money to somebody (negative LIBOR rates).

    FX interventions are not sterilized in the sense that they cannot be used for the multiplier effect, that they may prop up lending. The main method of financing are sight deposits. SNB bills are sterilized, but they do not exist any more since 2011.
    The latest target LIBOR is about -0.75%, but as said everybody has enough liquidity.

  3. rueffallais

    It is very confusing in my mind , those increase of sight deposits are coming from where ?
    These sight deposits are used to maintain the  peg ?
    Thanks for your explanation

  4. Newreader

    thank you for your response. 
    I understand that banks are “over-liquid” and don’t need money for lending or liquidity management.

    But actually I was thinking about such a possibility for arbitrage for banks: to borrow on the market at -0,75% and to deposit with the SNB at 0%?

  5. GeorgeDorgan

    The way is the following:
    1) Wealthy investors like Russian oligarchs or rich Greeks want to save their money against currency collapse or confiscation. Their main scope is typically to preserve wealth
    2) They deposit the money on a Swiss bank account in CHF. This would be a “sight deposit at the Swiss bank”.

    3) The bank does not know what to do with the funds, it does not lend it.
    4) Instead it deposits it at the central bank, the so-called “sight deposits at the SNB.”
    5) The quantity of sight deposits depends on the price of CHF: If CHF is expensive for foreigners then they may choose the dollar instead to save their money. If CHF is cheap like EUR/CHF =1.20 then it is more.

  6. Roger

    It is true that it’s possible that money isn’t credited to an account instantly but after a few days, right? Last week the deposits increased. This could be because of interventions in the last week or the week before, right? But in the last two weeks the Euro-Franc exchange rate was pretty high. Does this mean the SNB buys stuff in any case / even when the Euro-Franc exchange rate is pretty high?
    Another question: Are there other explanations than interventions for increased sight deposits?

    1. George Dorgan
      George Dorgan

      Yes, the SNB buys in any case, even if the rate is high. Why?
      1) If the SNB sells the EUR/CHF or does not buy, the EUR would quickly move downwards.
      2) The SNB wants to support the carry trade, the upwards trend of EUR/CHF.

      1. George Dorgan
        George Dorgan

        Another question: Are there other explanations than interventions for increased sight deposits?

        There are two means of financing for current interventions:
        1) Sight Deposits (electronic printing)
        2) Cash (“traditional” money printing)

        So if cash is converted into sight deposits, then this may happen without interventions.

  7. Anon

    Hope you keep this blog updated, very good information to put through my head

  8. Julien

    Your website is really nice for anyone looking for detailed information on the SNB policy, thanks for keeping it updated.

    I have a question on your post, I found it clever to show the correlation between CFTC Positions and SNB FX interventions, but I don’t find the correlation particularily convincing. Couldn’t one find another variable to “predict” SNB interventions ? To put it differently, isn’t there any others indicator that could help “predict” SNB interventions ?


    1. George Dorgan
      George Dorgan

      Sight deposits are the earliest indicator of interventions apart from market chatter.
      Be aware that in most cases there is no correlation of CFTC and sight deposits. The aim of the graph is to show when one should not be short CHF.

      1. Julien

        ok thanks.

        I was thinking from your graph CFTC positions were one of the factors the SNB could look at when deciding to intervene or not, now I get what you wanted to show. Ok for market chatter, thanks.

  9. Niche

    50 year Swiss gov. bond now yielding 0.223%…

    1. George Dorgan
      George Dorgan

      A big part of negative or near-zero yield is the expectance that CHF will be stronger than EUR or USD.

  10. Meier

    SNB now has third-highest FX reserves (China and Japan highest and second-highest. Previously Saudi Arabia was third-highest but its reserves position declined due to the decline in oil prices.


    1. George Dorgan
      George Dorgan

      The Wikipedia page could need an update, because they include gold in the Foreign exchange reserves. It is a difference if you own gold or fiat as reserve.

  11. Jeremy

    Hi guys – thanks for the great posts.
    Just wondering when did you change your outlook that things were going to head down (to parity) before they would head back up again?

    Also noting that you had previously mentioned about the bands that the SNB is comfortable where the EUR sits. I.e. 1.068 was at the low end of their comfortable range.
    “Comfortable” due to their assets being mostly denominated in EURs; assets reduce, then relative debt increases.

    Looking forward to understanding

  12. Mark


    Do you still believe in Inflation game ? ( eur/chf – 0,9 ?) How about short term prediction ( a month, year ? )


    1. George Dorgan
      George Dorgan

      Do you still believe in Inflation game ? ( eur/chf – 0,9 ?) How about short term prediction ( a month, year ? )
      Regards, Mark

        I have no doubt that the EUR/CHF (and also the USD/CHF) will go to 0.90. But there are factors that have a deflationary effect and delayed this currency movement. The most important factors are:

        • Ageing and increased saving during the years before the pension: The Eurozone is currently following Japan; this means temporarily low inflation. But finally there will be a shortage of labor and rising prices. Switzerland will follow only later – in particular because the Swiss import the needed labor.
        • Productivity increases in China or other Asian economies, when people move from rural areas to the cities and provide manufactured goods for advanced economies. This “core theme” from Michael Pettis is still happening today, it should end in about 20, maybe 30 years.
        • Productivity increases that cannot be not measured in terms of GDP (remember that productivity=GDP/hours worked). This happens when you create better company processes without the need for investment (which again is part of GDP) – thanks to the internet and computer-driven economy. Switzerland is one of the leaders in improving processes – last but not least, because of the high labor costs..
        • The Eurozone is still far from full employment, in particular in the Southern countries, so salary increases are still low. This item is quite important because it implies that inflationary pressures and rate hikes may happen in Switzerland first

      In my original thesis, I took a simple assumption, namely the typical business cycles of seven years. But I ignored that these deflationary factors delay the second part of the game, the inflation game.
      Look at Japan, then you see how deflationary pressures can persist in an ageing, but not yet over-aged society. I would hence adjust my estimate to 20-25 years, not 7.
      source post

  13. Stefan Wiesendanger

    My gut feeling as per beginning of 2018 says that we are getting closer to the inflation game.

    – inflationary policies in the US (for which the cautious tightening by the Fed is no match)
    – wage-driven inflation in Germany and Northern European countries
    – subdued wage growth in Switzerland thanks to immigration
    – exploding earnings growth of Swiss companies thanks to successful fitness programs post-2015
    – accelerating GDP growth
    – PPP disbalance from long-term average in the CHF/EUR has disappeared

    Last and IMHO most importantly, for the first time there are prolonged negative real interest rates in Switzerland [1]. This is in some sense in contradiction to the SNB’s objective to preserve the value of money, so they will have to loosen their grip on the CHF.

    [1] This is true when taking the 3M libor as a basis (source: UBS chartset p. 57 for download here: https://www.ubs.com/global/en/wealth-management/chief-investment-office/key-topics/2017/ch/swiss-economic-forecast.html).
    The SNB sees real interest still at around 0% – for this they resort to taking VAR-adjusted inflation expectations instead of observed inflation and compare these to 10y government bonds as a basis (source: 1Q18 quarterly assessment by the SNB p. 23 for download here: https://snb.ch/de/mmr/reference/quartbul_2018_1_komplett/source/quartbul_2018_1_komplett.de.pdf)

  14. Paweł Maziarz

    Dear George, you are so firm beliver of the strongest currency in the world. Imagine sudden outflows of assets abroad CHF. Where was CHF if:
    – polished gold robbed by nazigermans was returned to descendants of citizens burned in camps,
    – all petrodollars deposited in CHF fuelled Londoncity,
    – all drug incomes loundred in CHF bank accounts were doped by policymakers,
    – all bloody money of dictators was transfused and frozen in banks of NYC,
    – all the richest of the world were forbiden to deal with CHF? Belive me, in 3 years franc world be the weakest currency in the world if it was decided.

  1. lapang DADA: disinflasi, deflasi, deflationary | I Am Investor

    […] the Japanese move is similar to tiered measures put in place by the Swiss National Bank, which punishes sight deposits, or commercial bank assets, of more than 320 billion Swiss francs ($312.5 billion) with a fee of […]

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