The SNB released its foreign reserves position for June 2012 (here’s a time series XLS). Foreign currency reserves increased from CHF305.9bn in May to 364.9bn in June, an increase of 59bn or €49bn. It is clear that the Euro outflows were extremely high during June, a bit more than €12bn per week.

What was also very interesting is that the SNB released some statistics on its reserve holdings for 2012Q2, mainly currency breakdown and investment categories:

Euro holdings increased from 51% to 60%. Since at 2012Q3 its foreign currency reserves were CHF237.5bn and almost all of the FX inflows during 2012Q2 should have been Euros, a crude calculation would expect Euro holdings to be close to 67%. It is clear that SNB did not diversify a lot of its holdings. Its investment was made in AAA rated government bonds while the worrying part was the fact that duration dropped from 4 to 2.8 years. Given the fact that even the 3Y German bund is now in negative territory (as well as any short-term Eurepo rates) and the SNB pays zero on deposits, the currency floor is now a loss making business for the SNB.

Although central banks do not need equity (as was pointed out by SNB itself) there’s a high risk of the SNB either trying to diversify its holdings (by selling Euros) or ‘strengthening’ the currency floor by adopting a negative deposit rate policy.