Swiss Franc continues to strengthen: Enormous run into Swiss bonds!

What a move. The Swiss Franc continues to strengthen. Just on Friday we reported about it. And now over the weekend this movement has continued. If the Euro vs. the Swiss Franc (EURCHF) was still quoted at 1.0950 on Friday morning, the current rate is 1.0884. Awesome! The chart shows the price trend since 10 July. EURCHF continues to fall, so the Franc continues to strengthen.

It’s not just the ECB’s policy that is making the Swiss Franc rise

There is, of course, ECB policy. Recent indications show that the ECB will cut interest rates and/or make new bond purchases in September. This will weaken the Euro and automatically strengthen the Swiss Franc. But: Take a look at the yield on ten-year Swiss government bonds, which we have presented in the following chart (last 12 months). Last Wednesday the yield was still -0.74%. Today it is already -0.88%. What madness!

On the one hand it is a run into the security of Switzerland! On the other hand there is a lot of gambling. Because professional speculators with very large sums of money make good money if they bet on continuously rising bond prices (falling yields). Whoever goes from Dollar, Euro or Pound investments to Switzerland must of course also buy the Swiss Franc. This of course generates further price buoyancy for the Franc! According to LBBW analyst Elmar Völker, the current reason for the run on Swiss securities is the announcement of further US punitive tariffs on Chinese goods. The pressure on the ECB to follow up its announcements regarding a comprehensive monetary easing with action very soon continues to increase.

What is the SNB waiting for?

Well. All that remains (as we have already pointed out several times) is the question: What is the Swiss National Bank (SNB) waiting for? Its declared aim is to weaken the Swiss Franc or prevent it from continuing to strengthen. And for quite some time now, exactly the opposite has been happening. If a tourist from Euroland wants to go on holiday in Switzerland, it will become more and more expensive. If commercial customers from abroad want to buy goods in Switzerland, it will become more and more expensive for them. For some time now, the currency market has been assuming that the SNB will intervene. So print the Swiss Franc digitally and sell it for Euros and Dollars. The SNB does not issue official announcements on the subject. We could notice such interventions by sudden jerky devaluations of the Franc. But there is really nothing to be seen of this at the moment. Is the SNB still waiting for the ECB’s announcement in September? But gee, the Franc is already gaining extremely strongly!

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