As of 18 July, the Swiss National Bank (SNB) reports total sight deposits at CHF 475.3 billion, an increase from the previous CHF 464.1 billion. Domestic sight deposits rose to CHF 444.8 billion from CHF 434.9 billion.<\/p>\n
The rise in sight deposits is attributed to financial institutions seeking refuge from negative interest rates. Due to the recent rate cut, the Swiss Average Rate Overnight (SARON) has decreased to between -0.03% and -0.04%. Consequently, placing reserves back with the SNB has become a more attractive strategy.<\/p>\n
We see the latest increase in sight deposits as a direct reaction from financial institutions to the central bank’s recent rate cut. The move shows there is excess cash in the system and confirms the policy’s success in pushing short-term rates into negative territory. This liquidity situation sets a clear tone for the market in the coming weeks.<\/p>\n
For those trading interest rate derivatives, the data reinforces the view that Swiss rates will remain low. SARON futures are already pricing in a negative rate environment for the remainder of the year, with some market participants now speculating on a further cut by December. We believe strategies that profit from stable or declining short-term rates, such as selling Swiss franc interest rate futures, are well-positioned.<\/p>\n
This monetary policy stance is likely to weigh on the Swiss Franc. Historically, periods of rate cuts have led to a weaker franc, a trend we saw when the EUR\/CHF cross rose from 0.95 to above 0.98 following the rate cut in June 2024. Therefore, we would consider using options to bet on a higher USD\/CHF or EUR\/CHF exchange rate.<\/p>\n
The low-rate environment should be supportive for Swiss equities. Cheaper borrowing costs can boost company earnings and make stocks more attractive than holding cash, which is now yielding negative returns. With the Swiss Market Index already up nearly 6% since the last policy easing, we feel that selling out-of-the-money put options on the index is a viable strategy to collect premium.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Swiss sight deposits rose to CHF 475.3 billion as financial firms respond to falling interest rates.<\/p>\n","protected":false},"author":62,"featured_media":17028,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-26850","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t