Behind the doubling of dollar swaps between the U.S. Federal Reserve and the Swiss National Bank is the unprecedented demand for dollars by Swiss banks, the Swiss financial website “In$ide Paradeplatz” reports. This is going on in the context of massive margin calls on British pension funds and a rumored crisis of Credit Suisse, a major derivatives counterparty.
While on Oct. 5, the SNB first requested $3.1 billion, one week later it doubled to $6.27 billion. The number of Swiss banks requesting dollars went from 9 to 15. “The doubling of the auctioned total is historic. Domestic institutions had long not borrowed so much money,” writes In$ide Paradeplatz.
Such dollar swaps have been common since 2008, but now it is different. Whereas last year such loans cost 0.33%, now they cost 3.33% for a 7-day loan.
