Bank Of America: Real Yield Resilience

Bank of America Research note that "CHF continues to defy convention. Against the backdrop of an improving market landscape (declining financial stress, improving liquidity conditions), the currency has remained relatively resilient. In TWI terms, CHF is still comfortably in positive territory, but more significantly is trading at its highest levels since the peg broke in January 2015. The collapse in USD/CHF has been the primary driver for the strength in the TWI as EUR/CHF remains largely confined to a range, capped by CHF1.08. The latter largely reflects positioning and the move in EUR/CHF risk reversals. We think a bigger dynamic is at play: against the backdrop of global QE, SNB balance-sheet expansion does not look as unique as it once did. Indeed, SNB balance-sheet expansion has been among the slowest this year. As a result, Switzerland has benefited from the move in G10 real yields. August is a notoriously difficult month to extract trends, but recent resilience bodes well for CHF heading into the rest of the year and we reiterate our bearish stance on GBP/CHF."