SNB: Bank See Policy Implementation Unaffected by Move to 0%
Jun-19 10:38
Today's SNB cut to 0% raised some questions around their monetary policy implementation. Overall, the takeaway seems to be that while some Swiss money market rates may move (further) into negative territory, the SNB sees limited adverse effects from today's move - as opposed to more considerable challenges once the policy rate were to be cut into negative territory. Details below:
- The new press statement reads that "banks’ sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold. The discount for sight deposits above this threshold remains unchanged at 0.25 percentage points."
- That means that as in previous cuts, above-threshold remuneration will be cut by the same amount as the policy rate was - thereby keeping the spread, as above, at 25bps.
- They have also uploaded a new "instruction sheet governing interest on sight deposits" on their website, giving details on threshold calculations and scope of application:
- For sight deposit account holders subject to minimum reserve requirements (domestic banks: "The threshold corresponds to the moving average of the minimum reserve requirements over the preceding 36 reference periods (RPs), multiplied by the applicable threshold factor. The last RP, i.e. RP 36, is the RP that starts on the 20th calendar day three months before the beginning of the respective interest period."
- For all other sight deposit account holders: "The SNB sets fixed thresholds. These are in principle set at CHF 10 million."
- In the press conference, the Governing Board have mentioned multiple times that the key rate to be considered for monetary policy purposes remains the SNB policy rate - not the remuneration rate for sight deposits above the threshold factor, which is lower than the policy rate in order to facilitate money market activity.
- They have also added that, while that is a factor they watch more broadly, they are not seeing financial stability in Switzerland being threatened by today's move. However, bank profitability more specifically is not part of the SNB's optimisation function, they've mentioned.
- The press conference playback video appears not to be online on the SNB's website yet; we will point out further potential details in our full review of the decision out later today.
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ESM ISSUANCE: 6-Month ESM-Bills
May-20 10:34
| Type | 6-month bills |
| Maturity | Nov 20, 2025 |
| Amount | E1.094bln |
| Target | E1.1bln |
| Previous | E1.085bln |
| Avg yield | 1.973% |
| Previous | 2.096% |
| Bid-to-cover | 2.89x |
| Previous | 2.43x |
| Previous date | Apr 15, 2025 |
US 10YR FUTURE TECHS: (M5) Support Remains Exposed
May-20 10:32
- RES 4: 112-20+ High May 1 and a bull trigger
- RES 3: 112-01+ High May 2
- RES 2: 111-22 High May 7 and a key near-term resistance
- RES 1: 110-23+ 20-day EMA
- PRICE: 110-09 @ 11:21 BST May 20
- SUP 1: 109-18+ Low May 15
- SUP 2: 109-08 Low Apr 11 and key support
- SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
- SUP 4: 108-21 Low Feb 19
Treasury futures maintain a bearish tone and the contract is trading closer to its recent lows. Support at 110-01+, 76.4% of the Apr 11 - May 1 bull leg, has been cleared. The breach strengthens a bearish theme and exposes key support at 109-08, Apr 24 low and a bear trigger. Key near-term resistance is at 111-22, the May 7 high. A move above this level is required to signal a potential reversal. First resistance is at 110-23+, the 20-day EMA.
OUTLOOK: Price Signal Summary - USDJPY Maintains A Softer Tone
May-20 10:16
- In FX, EURUSD continues to trade above last week’s low and recent weakness appears corrective. A key support at the 50-day EMA, at 1.1102, remains intact. A clean break of this average would undermine the uptrend and highlight a stronger reversal. Key trend signals still highlight an uptrend. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction and highlight a bullish break.
- GBPUSD traded higher Monday, extending the recovery from 1.3140, the May 12 low. A bullish engulfing candle on May 13 highlights a reversal signal. The pattern remains valid and if correct, signals the end of the recent corrective cycle and a resumption of the uptrend. Key support to watch is 1.3126, the 50-day EMA. A continuation higher would refocus attention on the key resistance and a bull trigger, at 1.3444, the Apr 28 / 29 high. USDJPY continues to trade below the May 12 high and the pair maintains a softer tone. The latest pullback signals the end of the corrective cycle since Apr 22. A stronger reversal lower would expose 142.36, the May 6 low. Note that the 20-day EMA, at 145.18, has been cleared. The breach strengthens a bearish theme. Key short-term resistance has been defined at 148.65, the May 12 high. Initial resistance is at 146.23, the 50-day EMA.
