The SNB released its ‘IMF Special Data Dissemination Standard’ for July. What’s important is the FX reserves entry for July which increased to CHF406.45bn (excluding gold) from 365.06bn in June, an increase of 41.39bn or around CHF10bn per week. The pattern of high euro outflows to Switzerland does not seem to be stopping.

By now SNB Euro reserves should be over €200bn, more than 6,5% of the Eurosystem balance sheet or 13% of German tradable debt securities. Its portfolio decisions (since its FX reserves investment is mainly on government bonds) can create large premiums and exacerbate price movements in the Euro government securities market. Since such central bank portfolios usually include medium-term securities and German bunds yields are negative or zero up to 3-year tenors, SNB’s currency floor is probably creating negative income out of its own investment options.