SNB Abandons Swiss Franc Euro cap, Swiss Stock Market Crashes

In a world of central planning, all it takes to destabilize the markets is for authorities to succumb to their caprices.

The Swiss central bank, the Swiss National Bank, suddenly decides to end the 1.2 franc per euro cap.

From the Bloomberg:

The Swiss National Bank unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro in a u-turn that may change the perception of a century-old institution known for reliability.

In a surprise statement that sent shockwaves through equities and currency markets, the central bank ended its cap of 1.20 franc per euro and reduced the interest rate on sight deposits, deepening a cut announced less than a month ago.

The shift marks an attempt by the SNB to reinforce its defenses of the economy before government bond purchases by the European Central Bank that could crumple the franc cap. The franc surged after the announcement, Swiss stocks including UBS AG tumbled and the chief executive of watchmaker Swatch Group AG said the policy shift would hurt exports. SNB President Thomas Jordan defended the move, saying surprise was necessary.

It’s pandemonium on Swiss financial markets as the EUR/CHF collapse.

Yields of 10 year Swiss bond collapses.

Just look at that bond yield collapse (bond rallies)! Yields of 7 year Swiss bonds turn negative! (all charts above from investing.com)

Swiss stocks, as of this writing, have crashed 10%!

As been repeatedly stated here, crashes have become real time events.

Speculations are rife that SNB actions have signified as hints to a massive ECB QE that may come next week. And has most likely been the reason for the massive swing from losses to substantial gains for other European Stocks.

(charts above from Bloomberg)

Gold has so far soared 2%. US stocks have been wildly fluctuating from losses to gains back to losses.

Curiously just last Monday the SNB said that they would maintain the franc-euro cap.

From Reuters (hat tip Zero Hedge)

The Swiss National Bank's cap on the franc at 1.20 per euro will remain its key monetary policy tool, the central bank's vice-chairman said in a television interview broadcast on Monday.

"We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy," Jean-Pierre Danthine told RTS.

The above is an exhibit of how financial markets have become almost entirely dependent on central bank policies.

And yet the outcome of centralization is a black swan event. So far this has been a Swiss financial markets affair. How this will affect trades and investments embedded on the franc-euro cap outside Switzerland remains to be seen.

We truly live in interesting times.