The SNB released its Monthly Statistical Bulletin for September 2012 which among other things contains interesting data on its FX reserves holdings. More specifically there’s a breakdown into securities and deposits holdings, as well as between currencies:
It is clear that during 2012Q2 the SNB did not manage to diversify out of the Euro and increased its net position by almost €80bn to a total of €182.5bn with the Euro exposure remaining at 60% of its total portfolio. In terms of investment breakdown, the SNB moved heavily towards securities:
If the 60% share was maintained in securities holdings, the SNB now holds more than €150bn in Euro area securities, mostly AAA rated (86%) with probably €50bn being acquired in the last few months. According to Standard & Poor’s, the SNB acquired €80bn in securities during 2012 (although the actual number seems to be quite lower) with most of them being French paper, which was one of the main reasons behind the strong performance of French securities during 2012.
The SNB has now become a significant player in the Euro sovereign debt market with its currency floor recycling liquidity back to the core. In a way, it is one more drain from the periphery (where probably most of the Euro outflows to Switzerland are originated) since now both outflows to the core and out of the currency area are not reinvested into the periphery but in AAA Euro core collateral or just held as excess reserve deposits in the ECB (Bundebank).
This pattern is unique to the Euro monetary area where currency (banknotes, bank reserves) holders have several options of high rated assets to invest their holdings, instead of the sovereign debt of the deficit country.
SNB reserve managers decisions now seem to play a significant role in the movements of certain assets classes (such as French paper) and market participants should pay close attention to their actions.