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Thursday, March 28, 2024

SNB Warns of “Temporary Deflation”, Promises Further “Unconventional Measures” Including Forex Interventions to Achieve “Stability”

Courtesy of Mish.

Unconventional Yields

Swiss Bonds are negative out to 10 years. They briefly went negative out to 15 years in the wake of the sudden removal of the Swiss National Bank peg to the euro back on January 13 as shown in the following chart.

Swiss 15-Year Bond Yield

Yield on 20-year Swiss bonds plunged to 0.10% on January 13 as well. Today, you can get 0.19% for 15 years or 0.31% for 20 years. That’s how crazy things are.

SNB Warns of “Temporary Deflation”

Please consider SNB Warns of ‘Difficult Times’ as Currency Move Hits Home

Switzerland is facing “difficult times” and a short period of deflation following January’s abrupt unwinding of a currency peg, one of the Swiss National Bank’s most senior policy makers said on Thursday night.

The comments from Fritz Zurbrugg, one of three permanent members of the SNB’s governing board, show the impact of the January 15 currency move on an economy often regarded as a safe harbour during the eurozone crisis. 

The Swiss franc has shot up in value since the removal of the peg that capped it at SFr1.20 per euro, making Swiss exports and Swiss holidays more expensive. A euro is now worth SFr1.05.

Mr Zurbrugg said that the fall in prices that Switzerland faces is “temporary” and would not threaten price stability in the medium term. “A damaging deflationary spiral is not expected.”

Swiss inflation is already in negative territory, with prices falling 0.8 per cent in February — worse than the 0.3 per cent fall in prices across the eurozone in the month….

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