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  #41  
Old 23.06.2022, 15:42
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Re: SNB rises rates to -0.25%

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I still wonder though, a 1.8 million property, which with current prices won't get you very much close to a big city, even with a 250k income and 20% down payment should in theory fail a stress test. I doubt lenders however have been turning too many of such people away in recent years though.
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  #42  
Old 23.06.2022, 16:35
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Re: SNB rises rates to -0.25%

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Ironically, the people who bought property during recent times where prices have gotten crazy are going to be least affected as they'll have locked in their mortgage during the times of low rates.
I am/was somewhat surprised banks were ok with such deals. Not to mention that it may cut into their profits and make them try compensate from elsewhere, potentially rising costs for new homeowners even further up.

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I still wonder though, a 1.8 million property, which with current prices won't get you very much close to a big city, even with a 250k income and 20% down payment should in theory fail a stress test. I doubt lenders however have been turning too many of such people away in recent years though.
I had made a similar calculation some months ago while the rates were still down. According to official household salary statistics, UBS mortgage calculator and ZH city tax rates a family at 10% top income (i.e. 10% earn more and 90% less) and assuming 20% downpayment they can afford max a 1.7m apartment. That's pretty much the price of a newer 4 room (approx 120m2) apartment in average parts of ZH city nowadays.

The only way prices can go further up imo if salaries rise significantly but not sure how will things will work out on that front and how for which income segment, industry, etc.
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  #43  
Old 23.06.2022, 17:29
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Re: SNB rises rates to -0.25%

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I am/was somewhat surprised banks were ok with such deals. Not to mention that it may cut into their profits and make them try compensate from elsewhere, potentially rising costs for new homeowners even further up.



Why would it cut into their profits ?



When you take a fixed rate mortgage, the bank does the same at a lower rate and the difference is their margin. They know exactly how much they going to makle from day 1 when you take the mortgage
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  #44  
Old 23.06.2022, 18:57
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Re: SNB rises rates to -0.25%

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When you take a fixed rate mortgage, the bank does the same at a lower rate and the difference is their margin. They know exactly how much they going to makle from day 1 when you take the mortgage
I don't know the exact functioning of the system but someone has to be paying for that. From whom does the bank take loan?
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  #45  
Old 23.06.2022, 19:12
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Re: SNB rises rates to -0.25%

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I don't know the exact functioning of the system but someone has to be paying for that. From whom does the bank take loan?
Mortgage bonds (Pfandbriefe)?
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  #46  
Old 23.06.2022, 20:28
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Re: SNB rises rates to -0.25%

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I don't know the exact functioning of the system but someone has to be paying for that. From whom does the bank take loan?
In this time of negative interest rates then people are happy to make a long term loan to a bank with any level of positive interest, the current yield on the Swiss 10-year government bond fell to under 1.3%

Last edited by marton; 23.06.2022 at 20:46.
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  #47  
Old 23.06.2022, 21:29
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Re: SNB rises rates to -0.25%

When the SNB hiked rates last week they did so purely in response to the Fed, although they did say they wanted prevent inflation spreading into goods and services. Perhaps there is some truth in it however at the moment it appears inflation in Switzerland is almost limited to the rise in cost of fuel and energy.

Further hikes weren't ruled out (means they're likely to happen), however with the chf inching closer to the euro (almost equal now) on news of the latest poor economic data from the eurozone, I wonder if this can even be risked? Or perhaps it's the same case as with the QE during the pandemic, if everyone prints then nobody prints (or so they thought!) if everyone hikes then nobody hikes!

Looking at the balance sheet though, the SNB has spent (printed) a fortune in the past decade trying to keep control over the value of the chf. Will be a hard balancing act trying to keep the value of the swiss franc under control in the current economic climate.

I think most likely case is that rates continue rise quickly this year by which time much of the world will be in recession which should allow them to come down again, albeit slower, over the next couple of years.
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  #48  
Old 23.06.2022, 22:46
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Re: SNB rises rates to -0.25%

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Looking at the balance sheet though, the SNB has spent (printed) a fortune in the past decade trying to keep control over the value of the chf. Will be a hard balancing act trying to keep the value of the swiss franc under control in the current economic climate.
I always thought the SNB keeps all the euros and dollars they bought with these newly minted Swiss francs so that when the tide reverses, then they can buy these imaginary CHFs back and henceforth support CHF against (speculative) depreciation. A Swiss newspaper was actually saying recently that this foreign-currency war chest to prop up CHF and therefore reduce the "imported" inflation instead of jacking up the interest rates and slowing down the economy.
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  #49  
Old 23.06.2022, 23:03
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Re: SNB rises rates to -0.25%

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I always thought the SNB keeps all the euros and dollars they bought with these newly minted Swiss francs so that when the tide reverses, then they can buy these imaginary CHFs back and henceforth support CHF against (speculative) depreciation. A Swiss newspaper was actually saying recently that this foreign-currency war chest to prop up CHF and therefore reduce the "imported" inflation instead of jacking up the interest rates and slowing down the economy.
https://www.snb.ch/en/mmr/reference/...omplett.en.pdf
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  #50  
Old Yesterday, 11:03
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Re: SNB rises rates to -0.25%

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I always thought the SNB keeps all the euros and dollars they bought with these newly minted Swiss francs so that when the tide reverses, then they can buy these imaginary CHFs back and henceforth support CHF against (speculative) depreciation. A Swiss newspaper was actually saying recently that this foreign-currency war chest to prop up CHF and therefore reduce the "imported" inflation instead of jacking up the interest rates and slowing down the economy.
Zerohedge calls the SNB "the hedge fund formerly known as Swiss National Bank".

So much so, that it has to file a 13F with the SEC.
And this a one reason why Switzerland is on a State Department list of "currency manipulators", together with China.

https://whalewisdom.com/filer/swiss-...dings_tab_link
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  #51  
Old Yesterday, 11:25
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Re: SNB rises rates to -0.25%

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Zerohedge calls the SNB "the hedge fund formerly known as Swiss National Bank".

So much so, that it has to file a 13F with the SEC.
And this a one reason why Switzerland is on a State Department list of "currency manipulators", together with China.

https://whalewisdom.com/filer/swiss-...dings_tab_link
What a load of horseshit.
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Old Yesterday, 14:11
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Re: SNB rises rates to -0.25%

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What a load of horseshit.
There is some truth to this.

Markets not braced for Japanese, Swiss cenbank liquidity drain

https://www.reuters.com/markets/euro...ain-2022-06-24
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Old Yesterday, 14:18
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Re: SNB rises rates to -0.25%

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There is some truth to this.

Markets not braced for Japanese, Swiss cenbank liquidity drain

https://www.reuters.com/markets/euro...ain-2022-06-24
The SNB decision strengthened the Franc, something they don't like but felt was the lesser evil vs. inflation threats. Then, when it comes to the "hedge fund" argument, many central banks and/or quasi-governmental institutions invest currency holdings in assets and there are many that therefore need to report under SEC rules.
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  #54  
Old Yesterday, 14:31
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Re: SNB rises rates to -0.25%

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The SNB decision strengthened the Franc, something they don't like but felt was the lesser evil vs. inflation threats. Then, when it comes to the "hedge fund" argument, many central banks and/or quasi-governmental institutions invest currency holdings in assets and there are many that therefore need to report under SEC rules.
I think it's more a tongue in cheek expression because unlike other central banks the SNB is publicly traded, has way too much cash to know what to do with it all so has ended up buying up loads of US tech shares like Apple, Google, Amazon, Microsoft and Twitter.
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Old Yesterday, 17:07
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Re: SNB rises rates to -0.25%

Still 0.5% hike is interesting to me. ECB is expected to go only for a 0.25% hike so I kind of view this as a signal that they are willing to fight inflation.
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  #56  
Old Yesterday, 17:11
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Re: SNB rises rates to -0.25%

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Still 0.5% hike is interesting to me. ECB is expected to go only for a 0.25% hike so I kind of view this as a signal that they are willing to fight inflation.
Kind of.
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  #57  
Old Yesterday, 17:32
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Re: SNB rises rates to -0.25%

Did you mean page 172, Balance sheet, assets, where "Foreign currency investments" makes 91% of total assets? That would be, almost CHF one trillion buffer, to buy back the virtually created Swiss francs if likes the of Soros were trying to short it...
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Old Yesterday, 23:27
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Re: SNB rises rates to -0.25%

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I think it's more a tongue in cheek expression because unlike other central banks the SNB is publicly traded, has way too much cash to know what to do with it all so has ended up buying up loads of US tech shares like Apple, Google, Amazon, Microsoft and Twitter.
The SNB sells CHF to buy other currencies, with which foreign assets (mostly US bonds and stocks) are bought. Comparatively little notional equity on the balance sheet is ready to catch drawdowns, something like less than 10%.

That's pretty much how hedge funds are structured and operate.

Except the SNB has no borrow costs and can literally print as much CHF as they want. Plus its investment horizon is unlimited, its gold for instance was acquired a century ago. And of course the entire country will hold any debtors good if need be, so nobody has grounds to object or complain (not that it was any of their business to begin with).
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