FED swap line $200m to SNB

[DRumsfeld2000]

Does anyone have any comment on this? This is beyond my knowledge of the markets, but I thought the Swiss banks were well capitalised and relatively safe. Could this be something to do with trying to get the value of teh Swiss Franc down?


http://www.zerohedge.com/news/cue-pa...most-october-2

[pescamaaan]

Re: FED swap line $200m to SNB

i believe this indicates there is a demand somewhere for dollar liquidity. i don't think it's an action by the SNB to weaken the CHF, instead there are reports that someone is in trouble and is using SNB as a conduit to get dollars. the dollar is rallying....look at all currencies against USD for the last 24hrs and also look at the weakness in commodities (minus gold and silver).

there's a demand for USD and this swap could indicate a potential squeeze somewhere...

it's amazing the lack of understanding of the true meaning of federal reserve currency swaps in the msm...i see report after report of what happened but zero explanation as to why...

[Slimprofits]

Re: FED swap line $200m to SNB

it's amazing the lack of understanding of the true meaning of federal reserve currency swaps in the msm...i see report after report of what happened but zero explanation as to why...

it took me a few years to find someone (EJ) that was capable of explaining of how money is actually created and in a way that I could wrap my head around.

[lektrode]

Re: FED swap line $200m to SNB

it took me a few years to find someone (EJ) that was capable of explaining of how money is actually created and in a way that I could wrap my head around.

+1

[ASH]

Re: FED swap line $200m to SNB

i believe this indicates there is a demand somewhere for dollar liquidity. i don't think it's an action by the SNB to weaken the CHF, instead there are reports that someone is in trouble and is using SNB as a conduit to get dollars. the dollar is rallying....look at all currencies against USD for the last 24hrs and also look at the weakness in commodities (minus gold and silver).

there's a demand for USD and this swap could indicate a potential squeeze somewhere...

I agree. It sounds like there is a dollar squeeze. European banks are getting cut off from dollar financing from American lenders because (I think) of concern about their solvency in the event of losses from the sovereign bond crisis. It was widely reported today that an unnamed European bank sought $500M in emergency funding from the ECB through its swap line with the Fed.

Andrew Roberts, credit strategist at RBS, said investors are haunted by fears that European banks may have lost full access to America's $7 trillion markets, leaving them at imminent risk of a dollar squeeze.

An unidentified European lender had to tap $500m from the European Central Bank's (ECB) swap line with the Federal Reserve, indicating that it had been shut out of the markets. US investors have brought down the guillotine since the EMU debt crisis spread to Italy and Spain, and Germany vetoed any form of eurobonds or fiscal union. "This is what has kicked [off] the latest turbulence," Mr Roberts said.

Ewald Nowotny, Austria's central bank governor and an ECB member, told newspaper Wirtschaftsblatt there was a "growing reluctance" within US money market funds to finance the Europeans, though he blamed the cut-off on a change in US banking regulations.

I see this as a sign of funding stress in the European banking system, and an indicator that a banking crisis there may be kicking off. I didn't digest this news until this evening (my 'day job' was busy), but I am thinking this is a significant development. One thing I'd like to check is whether this is actually an uncommon occurrence, or simply a cherry-picked piece of scary news.

[ASH]

Re: FED swap line $200m to SNB

See this FAQ on the liquidity swap facilities.

Here is where the weekly data on swaps is published. You can see the $200M drawn by the Swiss. I figure the $500M drawn through the ECB won't show up until the next weekly report. It looks like the last time the facilities were used was in March, at about the $70M level. So, this isn't exactly 'business as usual' -- could be an indicator of real funding stress.

[Chomsky]

Re: FED swap line $200m to SNB

Both of the large Swiss banks have denied accessing the swap lines - so who is it?

http://www.zerohedge.com/news/offici...ust-120-away-2

http://www.nytimes.com/reuters/2011/...s.html?_r=1&hp

[mmr]

Re: FED swap line $200m to SNB

Could be the Swiss subsidiary of a foreign bank that happened to have some dollar-denominated debt coming due. Normally global banks have more flexibility to transfer capital / liquidity among their various international subsidiaries, but in this environment, regulators and market participants would likely frown on weakening a subsidiary in one country to reinforce one in another country.

[cjppjc]

Re: FED swap line $200m to SNB

it took me a few years to find someone (EJ) that was capable of explaining of how money is actually created and in a way that I could wrap my head around.

Could you supply a link please?