Swiss central bank raised $6.3 billion through a swap line with the FRS

Data from the Federal Reserve Bank of New York shows that the U.S. Federal Reserve's currency swap line brought almost $6.3 billion to the Swiss National Bank (SNB) this week. This amount is about double of the amount from last week.

On Wednesday, the SNB raised $6.27 billion in U.S. currency for seven days at an annual rate of 3.33%. A week earlier, it raised $3.1 billion for the same term and at the same rate.

The sum of these two transactions is greater than any of the spring 2020 transactions. At that time, the SNB and other central banks were able to obtain billions of dollars of FRS funds on the world market during the panic in the early days of the coronavirus pandemic.

The FRS has set up permanent currency swap lines with five central banks, which include the SNB, the European Central Bank, the Bank of Japan, the Bank of England and the Bank of Canada.

Another central bank made a swap deal with the FRS this week. The ECB was able to get $211.5 million, compared to $206.5 million the week earlier. Although, this is part of the ECB's typical weekly transaction range over the last year.

Periods of market quiet are not encouraging for the use of swap lines. Since markets have suffered in recent weeks from the FRS's hawkish policy in its fight against inflation, and the Bank of England was forced to intervene in the U.K. bond market because of the shocks by the new government's fiscal plans, the use of swap lines has recovered a bit.

Jefferies money market economist Thomas Simons wrote that the increase this week is not as large as during the severe crisis, but still significant. That's how he summarized the weekly FRS balance sheet data.