(26 APRIL 2018)DAILY MARKET BRIEF 2:SNB takes CHF 6.8 billion loss in Q1 2018

The Swiss National Bank reported a substantial loss for the first quarter 2018 as capital markets experienced a stormy environment, while the Swiss franc started the year off the wheel. Despite pocketing CHF 3 billion in dividend and interest payments, the central bank took valuation losses of CHF 3.9 billion on its bond positions, CHF 3.3 billion on its equity portfolio and CHF 0.2 billion on its gold holdings. Finally, the appreciation of the Swiss franc produced a foreign exchange loss of CHF 2.8 billion, while the revenue from Swiss franc positions reached CHF 0.5 billion.

The surge in interest rates in the euro zone and in the US, together with turbulences in equity markets, have significantly hurt the SNB’s portfolio during the first quarter. However, the second quarter will most likely be more favourable as the Swiss franc extended losses against all its G10 peers, falling 2.9% against the greenback, 2.15% against the pound and 1.8% against the single currency. The situation on the equity market is more balanced as European markets have recorded solid performance in April, while US ones have not moved much. Unfortunately, the bond prices are set to experience further downside as interest rates are rising on both side of the Atlantic.

By Arnaud Masset