Citi: CHF market is very very nervous as we approach the Peg level lower.. fewer and fewer players want to venture long as the risk-reward is less appealing.. the chances of SNB removing the bid are very low.. but if they were to.. it would be massacre.. This is reflected into the FX Option market : Market was extremely illiquid last week. No reason for this to change. 1m 4.00/4.55 with some serious risk premium priced for the Gold vote. EURCHF puts below 1.20 un-buyable for now, and option spreads (below vs above the peg in uneven delta) are either quoted wide or both call and put are spread as the risk is not offsetting.
Commerz: EURCHF r/r which is still very bid for the downside. Todays move further driven by the CHF/HUF mortgage news overnight where they have finally agreed on the terms for the conversion of outstanding FX mortgages. Outstanding mortgages are in the region of 12bn Euro of which I understand 85 % are in Chf. The central bank of Hungary has set aside 9bn Euros of their reserves for the conversion of those loans into forints. Given the amount will be provided in Euroas we can assume that the banks will then have to buy CHF to address the FX mismatch on their balance sheet.