Swiss National Bank (SNB) reported total sight deposits of CHF 442.5 billion for the week ending June 20, up from CHF 434.8 billion the previous week. Domestic sight deposits rose to CHF 430.0 billion from CHF 426.7 billion the week before.

Swiss Sight Deposits Update

This increase follows two weeks of declines in sight deposits, keeping levels stable compared to recent months. The SNB has recently introduced a tiered remuneration system for sight deposits. This system discourages banks from keeping too much cash with the central bank by imposing penalties. The goal is to improve liquidity in the Swiss money market. We are seeing a short-term shift in the trend of declining Swiss sight deposits. Total sight deposits at the SNB have jumped to over CHF 442 billion after a couple of quieter weeks. The rise in domestic deposits suggests a renewed demand or strategic changes from local banks. This upward movement may indicate that banks in Switzerland are less willing to lend for the short term or are holding back on using any excess cash. This could signal their expectation of tighter financing conditions or reduced liquidity in the markets we monitor closely, especially considering the SNB’s current policy.

Impact On Short Term Funding

The tiered interest system remains active. It’s a monetary strategy aimed at encouraging banks not to hoard large balances at the SNB. By imposing penalties on certain deposit tiers, the SNB hopes to push funds back into the broader money market and promote more lending. However, a rise in deposits, despite these penalties, may indicate a cautious approach or adjustments by liquidity providers. The increase in domestic deposits might be short-lived, possibly just a reaction to short-term settlement opportunities or upcoming maturities. It could also signal a renewed cautiousness in response to recent macroeconomic or geopolitical events. The SNB has clearly communicated its interest rate direction and policy outlook this month, so any reactions from banks may carry into early July. From our perspective in the derivatives market, these changes are significant as they affect short-term Swiss funding and future pricing expectations. A deposit increase of this size, especially with penalties in place, may lead us to reevaluate CHF liquidity risks or potential changes in repo demand. With this recent shift and no immediate changes expected from the SNB, the balance of regulatory pressures and voluntary asset positioning offers clarity for short-term pricing strategies. We should closely monitor spreads on Swiss franc interest rate products. If banks start to pull funds aggressively from deposits, it might temporarily affect volatility in short-term products. In the coming days, it would be wise to watch for any fluctuations in the moving averages of domestic sight deposits. Weekly changes like these, especially in relation to SNB policy signals, provide valuable insights. Keep an eye out for any significant shifts—we may need to adjust our assumptions if the behavior of these balances changes noticeably. Create your live VT Markets account and start trading now.

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