18 Dec 2014
SNB surprises markets by announcing negative rates – TDS
FXStreet (Barcelona) - Cristian Maggio, Head of Emerging Markets Research at TD Securities notes that SNB surprised the markets by announcing a shift to negative interest rates to support the CHF gap.
Key Quotes
“Just a week after their scheduled policy meeting, the SNB surprised markets by announcing a shift to negative interest rates in order to support the CHF cap. The cut to -0.25% and expansion of the target range for three-month Libor back to its normal +/-50bps range will take effect January 22nd. This shifts CHF deposits below EUR deposits for lowest yielding asset by 5bps, but the SNB’s Jordan has already reinforced that they can cut further if needed, something that should over time support a shift in flows elsewhere to take some of the pressure off of the currency.”
Key Quotes
“Just a week after their scheduled policy meeting, the SNB surprised markets by announcing a shift to negative interest rates in order to support the CHF cap. The cut to -0.25% and expansion of the target range for three-month Libor back to its normal +/-50bps range will take effect January 22nd. This shifts CHF deposits below EUR deposits for lowest yielding asset by 5bps, but the SNB’s Jordan has already reinforced that they can cut further if needed, something that should over time support a shift in flows elsewhere to take some of the pressure off of the currency.”