MBS Day Ahead: How Big a Deal is This Swiss Franc Business?

This chart was scaled based on everything that came before yesterday in order to see how big yesterday was by comparison.  The red line is the Swiss Franc vs US dollars.  The takeaway here is that the move was big.

You may ask yourself "why compare the Franc to US dollars as opposed to the Euro?"  You may also ask yourself how did you get here?  Where is that large automobile?  I'll answer those questions some other time.  For now, let's stick to why the chart above includes Swiss Francs vs Dollars.  The answer is as simple as a chart where the red line is the more germane Swiss Francs vs Euros.

In other words, the move was too big to put on a chart with any other mainstream financial instrument and still be able to observe relative movement that doesn't just look like a big, red vertical line and a bunch of horizontal lines.  The takeaway here is that the move wasn't just big, but that it was one of the biggest forex stories of the decade.

Not only was it big, but it was a blindside.

Not only was it a big blindside, but it's also open to interpretation.  Some are suggesting this means the Swiss National Bank is privvy to what the ECB has in the works for next week and are trying to get ahead of it.  Others are suggesting the SNB is aware of the ECB's plans and doesn't see them working.  Either way, markets will continue being driven by the tradeflows set in motion yesterday, and all we can do is watch and  react.  So far, that's been a pleasant experience for fans of low rates.  Just remember the level of drama required for yesterday's rally and keep in mind that it's not a sustainable source of bond market positivity.