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Front-End CHF Vols Bid Ahead of SNB Meeting

SNB
  • Headed into the SNB decision and press conference, the base case scenario still looks for 50bps hike as the bank's UBS/CS liquidity provision and enhanced access to USD liquidity can clear the path for further tightening today, despite turmoil in the domestic banking sector.
  • A 50bps hike is partially, but not fully, priced as per implied SARON index futures, with CHF OIS forward swaps indicating further tightening is expected beyond today's meeting - which should keep the fresh inflation forecasts in focus.
  • Front-end CHF vols remain elevated as they capture today's meeting. EUR/CHF O/N implied has cleared 17 points today, pushing the break-even on an ATM straddle out to 70 pips (vs. 30 pip break-even pricing on Monday).

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