The Swiss National Bank (SNB) is introducing a new monetary policy instrument. It will issue its own debt certificates in US dollars (SNB USD Bills) with terms of less than one year. The instrument will be employed as of mid-February 2009 and will be used until further notice to finance the SNB’s loan to the SNB StabFund.
The first auction of SNB USD Bills is to be held on Monday, 16 February 2009, from 10.00 a.m. to 10.30 a.m., via the Eurex Zurich Ltd electronic trading platform. After that, auctions of SNB USD Bills will be held once every two weeks. All parties who are authorised by the SNB to participate in both the CHF repo market and the primary and new issues market section of Eurex Zurich Ltd are eligible to take part in the auctions.
These parties may also accept subscriptions from third parties. The auction will take the form of a variable rate tender with allotment according to the Dutch auction method. The denomination is USD 0.5 million and the SNB USD Bills are offered with terms of 28, 84 and 168 days.
SNB USD Bills will be included in the list of collateral eligible for SNB repos. Consequently, they may also be used in SNB repo transactions. Moreover, in accordance with art. 16 of the Banking Ordinance, these securities may be counted as liquid assets. The general issue conditions as well as the conditions applying to the individual issues and their results will be announced on the SNB website (www.snb.ch, Financial markets, Monetary policy operations, SNB USD Bills).
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jck,
I thought you said they were dumping dollars into the system rather than keeping them and running the risk of losing their value due to their toxic nature. Why would they want to raise more dollars before this whole thing blows through?
As I have mentioned earlier, this is a way to fund the StabFund ( UBS toxic assets ) without using reserves or the fed swap line ( that just got extended btw). The StabFund has an 8 year life extendible to 12 so not a bad idea have some back up scheme to raise $.
jck, what’s the benefit of this to them?
No, they are market-funding the UBS $ assets they took over a while back, instead of relying on the fed swap line or their own reserves.
Why would they do this? Running into problems issuing swiss debt??