The Swiss National Bank (SNB) reported that total sight deposits on July 4 were CHF 459.8 billion. This is a small drop from the previous amount of CHF 460.7 billion. Domestic sight deposits also fell slightly. They stood at CHF 424.4 billion, down from CHF 425.8 billion earlier. This decrease in sight deposits indicates a small change in the excess liquidity in the financial system. We see this slight dip in total and domestic sight deposits as a sign of tightening financial conditions. While the change may seem minor, it suggests that liquidity is slowly being pulled from banks. A drop in sight deposits often means there’s either more activity in the money markets or a slight shift in the central bank’s approach. Weekly changes like this usually reflect gradual adjustments in monetary policy, especially when there aren’t any big surprises in the economy. In the past, similar changes have sometimes occurred before noticeable shifts in funding costs. Over the last few months, Jordan’s approach has been careful. He prefers to use balance sheet tools to manage domestic financial conditions without making major announcements. The latest figures indicate that intervention may still be happening but in a more measured way. It’s also possible that foreign exchange interventions could resume, especially if pressure on the franc increases again. From a trading perspective, it’s important to remember that the SNB often acts quietly. The overall message from these figures seems to show restraint, but in a structured and gradual way. If we adjust our positioning, we should pay attention to forward curves on CHF rates and changes in overnight inflation swaps. Price formation remains sensitive to perceptions of liquidity shifts, even if they seem small initially. Additionally, with the domestic banking system holding slightly fewer central bank reserves, short-term money market spreads may face slight pressure, potentially impacting positions in rate-linked derivatives. Recent data suggests that volatility could return to CHF interest rate products, especially if this trend continues through upcoming data releases. We think it’s important to pay attention to these balance sheet movements. They often come before rate changes or modifications in collateral rules. For those setting up positions, closely monitoring T/N and S/N basis could show if the market is starting to adjust to lower excess liquidity. Timing entries connected to funding flows could become more critical, especially as we enter a typically slower summer trading period. Derivatives pricing might also be affected by lower trading volumes. Premium skew may present opportunities, provided one carefully hedges against any remaining volatility. These brief disruptions can offer appealing return possibilities given the short duration risk. In summary, although the decline in sight deposits is small, it’s a data point worth factoring into broader risk evaluations, especially as funding conditions change gradually.

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