Show Me the Money

Wednesday, June 13, 2007


Tomorrow morning, at 9.30 am local time, the Swiss National Bank will announce its second quarter interest rate decision. A 25 bp rise in the LIBOR target is widely discounted; today's 3M LIBOR fix was 2.48%, a hair shy of the expected new target rate of 2.50%.

The SNB has also been the most vocal central bank in the world on the subject of the carry trade. For much of the past year, SNB officials have complained with increasing intensity about the weakness of the CHF and the prevalence of the Swissie as a funding currency.

Simply put, the time has come for the SNB to put up or shut up. Messrs. Roth, Gehrig, et al can really have no basis for complaint about CHF weakness if they are unwilling to do anything about it. It's more than three years since the SNB started raising rates; to date, they have hiked by a "whopping" 2.00%.

Gentlemen, if you don't want the CHF to weaken any more, then hike 50 bps. Appoint Rod Tidwell to the SNB board, if you have to. But if you want to complain about the weakness of your currency and expect the market to listen, you have to do one thing first.

Show.

Me.

The (higher yielding).

Money.

UPDATE: They blew it. Despite raising their current year GDP forecast from 2% to 2.5%, and even taking up their 2008 inflation forecast a smidge, the SNB did 25 bps. Please, messieurs, no more moaning about the CHF now!



Posted by Macro Man at 8:36 PM  

1 comments:

The French have a saying that literally translates as "smiling in their beards" (i.e. the somewhat obvious involuntary facial expression when speaking a white-lie, or similar untruth). (Beards by the way is actually not plural in this sense, but most french people confusedly make it so). Like the BoJ, and pursuant to yesterday's post, there is much Machiavellian advantage, to being a funding currency - for general political expediency, for general mercantile gain, and in Helvetia's case, particular financial advantage accruing to their largest Financial Institutions who presumably manage to hive a spread from intermediating the lion's share of SFR-related transactions.

So for the sake of "face" in relation to other finance ministers the SNB (& BoJ( will no-doubt continue to officially bemoan the leveraged specs, the plight be being a carry-trade-funder and the distortions they impose upon the systemic commons, but when they return to the paneled room for a schnapps, they will breathe a sigh of relief that they've got off lightly ....yet again at the system's, and others' expense.

"Cassandra" said...
1:30 PM  

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