The CHF Carry Trade
Borrow cheap francs, earn higher yields. The mechanics, the risks, and the honest path to 7% p.a. from Singapore.
What Is a Carry Trade?
A carry trade is the world's oldest yield trick: borrow in a currency that costs almost nothing, invest in one that pays more, and pocket the difference.
The core mechanic, in three steps
- Borrow currency A, the one with the low interest rate.
- Convert to currency B, the one with the higher rate.
- Invest in B-denominated assets. Profit = interest you earn − interest you pay − any currency move.
Worked example, with rates verified 1 Aug 2026
The catch, in one sentence
You are short the franc. If CHF appreciates, your loan becomes more expensive to repay in your own currency, and CHF is one of the world's most aggressive safe-haven currencies. The 2015 episode shows how violently it can move: on 15 Jan 2015 the SNB removed the EUR/CHF 1.20 floor and the franc surged roughly 20% intraday against the euro (SNB historical record).
Why carry is seductive
It pays you daily, because interest accrues every day you hold the position. It feels like free money, and it works for months or years, until it does not. The August 2024 yen unwind is the textbook warning: the BoJ hiked on 31 Jul 2024, USD/JPY collapsed from roughly 162 to 142 in days, and the Nikkei fell about 12% on 5 Aug 2024. Years of carry profits were erased in a week (Wellington Management).
Scenario · The kopitiam loan
Ah Kong loans you S$100 at 1% interest a year. You hand it to Mei Ling, who promises to pay 5% on her business. You pocket the 4% difference every year, no work needed. Now swap the names: Ah Kong is the Swiss bank, his 1% is the CHF rate, and Mei Ling is your US bond or your DBS shares. The catch: Mei Ling pays you in a different currency. If the franc strengthens while you hold, the S$100 you must return to Ah Kong becomes more expensive to buy back. The 4% you earned can vanish overnight, and more besides.
Why CHF? Why Not JPY?
Both CHF and JPY are classic funding currencies. Right now they are in very different places, and that difference is the whole trade.
The CHF case
The SNB policy rate is 0.00%, held since 18 Jun 2026, and SARON, the Swiss overnight rate, sits near zero (SNB data portal). The SNB signals it will hold 0% through 2026, with a high bar for negative rates, and it prefers FX intervention over rate hikes to manage franc strength. Inflation is around 0.3% for 2026 and 0.6% for 2027 per Saxo's CHF carry analysis. Switzerland combines low public debt, stable politics and structurally low inflation, which is why its borrowing costs stay structurally low.
Market confirmation, Aug 2026
OCBC noted on 7 Aug 2026 that "CHF remains under pressure as carry trade funding demand grows and the SNB appears comfortable with a weaker currency" (FXStreet). The trade is live, and it is crowded-ish.
The JPY case, and why it is riskier now
The BoJ call rate is 1.00%, held since 31 Jul 2026, and it is still rising: negative rates ended in Mar 2024 and the BoJ has hiked five times since (MacroMicro). Bloomberg called the yen carry "a ticking time bomb" in Feb 2026, and Wall Street jitters in July 2026 had analysts warning that another unwind could spark widespread damage to stocks (Business Insider).
Scenario · The car-rental stampede
Imagine 100,000 tourists renting the same cheap car, with the rental price renewed daily. One morning the rental company doubles the price. Everyone returns the cars at once, and the carpark becomes a stampede. That was the yen in August 2024. The BoJ raised rates on 31 Jul 2024, every fund holding yen borrowings rushed to close at the same time, USD/JPY fell from about 162 to 142 in days, and Tokyo stocks dropped 12% in a single day. Traders who had collected years of small daily profits gave it all back in one week. The same stampede can hit CHF, because much of the same crowd borrows both.
CHF vs JPY, side by side
| Metric | CHF (SNB) | JPY (BoJ) |
|---|---|---|
| Policy rate | 0.00% | 1.00% |
| Rate trajectory | On hold through 2026 | Hiking cycle |
| 10-yr change | −0.75% → 0.00% | −0.10% → 1.00% |
| Safe-haven status | Classic, strongest | Classic, fading |
| Unwind risk | Moderate | HIGH (ticking bomb) |
| SNB/BoJ stance | Comfortable with weak CHF | Defensive tightening |
Rates and stances verified 1 Aug 2026. Sources: SNB, MacroMicro, Business Insider.
The 7% Question
Can you get 7% p.a. from Singapore with CHF funding? Yes, but not from carry alone, and not without leverage and risk. Here is the honest arithmetic.
The raw spreads, verified 1 Aug 2026
- CHF→USD ≈ 3.5pp (3.50% − 0.00%)
- CHF→EUR ≈ 2.25pp
- CHF→SGD ≈ 0.83pp (SORA 0.829% − 0.00%)
- CHF→JPY ≈ 1.0pp
The unleveraged reality
CHF→USD carry alone is about 3.5% gross before FX moves, and CHF→SGD is about 0.8%. Neither reaches 7%.
The leverage bridge, capped at 2x
At 2x on CHF→USD, gross carry is about 7% (2 × 3.5%) before costs and FX. Add asset yield on top, from bonds or dividends, and 7% net becomes plausible. Leverage cuts both ways, which is why the cap matters.
Saxo's worked example, verified 30 Mar 2026
CHF margin loan at 1% (0% Swiss offer + 1% VIP markup). Buy DBS, 5.5% dividend yield, at 2x:
10,000 CHF position = 5,000 CHF cash + 5,000 CHF loan
Dividends 550 CHF − interest 50 CHF = 500 CHF net on 5,000 CHF = 10.0% yield
Same trade with a USD loan at 4.75%: yield drops to 6.25% (Saxo Markets SG)
Scenario · Two years in the life of the 10% trade
You put in S$50,000, borrow another S$50,000 in francs, and buy S$100,000 of DBS at a 5.5% yield. Loan costs 1%. Year 1 is lovely: S$5,500 in dividends minus S$500 in interest, roughly 10% on your money, and the franc drifts lower, adding a little extra. Year 2 brings a regional slump. DBS falls 15%, so your S$100,000 position is worth S$85,000, the loan is still S$50,000, and your equity has shrunk from S$50,000 to S$35,000, a 30% hit. Nothing fraudulent happened. The bank is fine. The market simply moved, and at 2x leverage it moves twice as fast against your money.
What 7% actually requires
- Leverage of 1.5–2x
- A yield-bearing asset, dividends or bonds
- FX discipline, hedging or pre-committed triggers
- 3–5 years of patience
Miss any one of these and you land at 3–5%, or worse.
The Risks, Macro and Micro
There are risks. Here is the full map, because you can only manage what you can name.
Macro risks
- FX risk, the killer. You are short CHF. If the franc appreciates, your loan grows in SGD terms. The worst case in history: on 15 Jan 2015 the SNB suddenly removed the EUR/CHF 1.20 floor, EUR/CHF crashed about 20% intraday, and CHF surged against everything. Margin accounts were wiped out in minutes (SNB historical record).
- Safe-haven spikes. Any global crisis, war, banking stress or US default scare, sends money into CHF. The franc does not drift up. It jumps.
- Interest-rate risk. If the SNB hikes on an inflation surprise, your funding cost rises. If the Fed cuts hard, your carry spread shrinks. Both compress the trade.
- Carry-unwind contagion. When JPY carry unwinds on a BoJ surprise, it drags all carry trades, including CHF, because hedge funds deleverage everything at once. August 2024 proved it (Wellington Management).
- SNB intervention risk. The SNB intervenes to weaken CHF, which helps you, but it could also act if the franc collapses. Policy is a two-way door.
Micro risks
- Leverage and margin risk. At 2x, a 10% drop in your asset is a 20% hit to equity. Margin calls and stop-outs can force you to sell at the worst moment; Saxo auto-reduces the loan from 100% to 90% utilisation on breach (Saxo).
- Credit risk. If you invest in bonds or REITs, the issuer can default or cut dividends. DBS probably will not. A junk bond might.
- Liquidity risk. In a crisis you may not be able to sell at a fair price, and the broker may widen spreads tenfold.
- Rollover and term risk. Margin loans are callable and rates reprice. Your 1% CHF loan is not locked for 5 years.
- Platform risk. Broker failure, platform outages, FX conversion spreads, custody. Only use MAS-regulated brokers; SDIC protection applies to cash, not investments.
- Tax and structure. Singapore has no capital gains tax for individuals, SG dividends are tax-exempt, and US dividends face 30% withholding by default, or 15% with a W-8BEN under the treaty. FX gains on capital are not taxed in Singapore, but keep records (IRAS).
The risk map at a glance
| Risk | Type | What it does | Mitigation |
|---|---|---|---|
| CHF spike | Macro | Loan grows in SGD terms; 2015 did ~20% in a day | Size for it, hedge, triggers |
| Safe-haven jump | Macro | Franc jumps in any crisis | Gold sleeve, cash buffer |
| Rate flip | Macro | SNB hikes or Fed cuts compress the spread | Weekly monitor, exit rules |
| Unwind contagion | Macro | JPY unwind drags all carry trades | Watch BoJ calendar, VIX |
| Margin call | Micro | Forced sale at the worst moment | ≤2x, cash buffer 10–20% |
| Credit default | Micro | Issuer cuts dividends or defaults | Diversify 5–10 names |
| Liquidity | Micro | Wide spreads, no fair price in a crisis | Liquid ETFs, avoid junk |
| Rollover | Micro | Loan rate reprices, loan is callable | Re-check rates weekly |
| Platform | Micro | Broker failure, outages, custody | MAS-regulated only |
| Tax | Micro | US withholding, record-keeping | W-8BEN, keep records |
Scenario · The 2015 shock in one account
On 14 January 2015, a trader in Zurich borrowed francs at near-zero cost to buy European bonds paying 2% more. The franc was pinned at 1.20 per euro by the SNB, so the risk looked small: how much could the franc rise when the central bank was holding it down? The next morning, the SNB removed that cap with no warning. The franc jumped roughly 20% against the euro within minutes. His loan, denominated in francs, suddenly cost 20% more to repay, and the margin system did the maths before his coffee did: the position was closed automatically and the account emptied. The central bank changed his financial life in less than a day. That is the risk at the core of every carry trade, and why this guide keeps repeating: size for the worst day.
Risk Management and Due Diligence
This is the section that separates a strategy from a gamble. Follow it before you put a single dollar in.
The seven rules
- Size for the worst day, not the average day. Assume CHF can spike 10% overnight; in 2015 it did 20%. At 2x leverage, a 10% CHF spike is a −20% equity hit. Your 20% drawdown tolerance means: never run more than 2x, and prefer 1.5x.
- Set de-risking triggers before entry. Pre-commit: if CHF appreciates X% from entry, cut leverage to 1x; if Y%, close. Write them down. Do not decide in the moment, because panic is a terrible advisor.
- Hedge or accept. A full FX hedge, forward or option on CHF, costs about 0.5–1% p.a. and converts carry into a bond-like return. A partial hedge of 50% is the middle path. Unhedged means you are betting on the franc staying weak.
- Diversify the asset side. Do not put 100% into one stock; Saxo's DBS example is a concentration risk. Spread across 5–10 names, 2–3 asset classes and 2 currencies.
- Keep a cash buffer. Hold 10–20% of the portfolio in SGD cash or T-bills so you can survive margin calls without forced selling.
- Monitor weekly. Check policy rates, USD/CHF and CHF/SGD, the carry spread, margin utilisation and news. Fifteen minutes, same day every week.
- Never add to a losing carry trade. Averaging down on leverage is how accounts die.
Due diligence checklist, before choosing a platform
- ☐ MAS-regulated? Saxo Markets is MAS-regulated (Co. Reg. 200601141M); IBKR SG is MAS-regulated.
- ☐ What is the CHF loan rate formula? Benchmark + markup; Saxo: 0% + 1% VIP = 1% (Saxo).
- ☐ Are margin call and stop-out rules in writing? Saxo: auto partial stop-out at 100%→90% utilisation.
- ☐ Can I hedge FX on the same platform? Saxo: yes, via the FX trade ticket.
- ☐ What are the FX conversion spreads on deposits and withdrawals?
- ☐ Is my cash protected? SDIC covers up to S$100k per bank; broker client money rules apply.
- ☐ What happens if the broker fails? Check client asset segregation in the legal docs.
- ☐ Tax forms: W-8BEN for US assets, 15% dividend withholding instead of 30% (IRAS).
The three-question stress test, before entry
- CHF +10% tomorrow: what is my equity? Can I sleep?
- My asset falls 15% and CHF rises 5% together: is there a margin call? What do I sell?
- Rates flip, SNB hikes to 1% and the Fed cuts to 2%: is the trade still worth holding?
Scenario · The weekly check-in that saved a portfolio
Mrs Tan runs the hybrid portfolio: 1.5x leverage, a cash buffer, and triggers written on paper: if USD/CHF falls 4% from entry, cut leverage to 1x. For 18 months the franc creeps lower, the carry pays, and she does nothing but collect. One Friday, her 15-minute check shows USD/CHF down 3.8% in a fortnight. Not at the trigger yet. The next Friday: 5.1% down, with a BoJ surprise making markets jittery. She trims the same morning, cutting to 1x. Over the next three weeks the franc gains another 4%. She lost less than half of what her trigger-less neighbour lost, and when the panic passed she still had her capital to restart. The rules did not predict the shock. They just made sure she was small when it hit.
Three Options to Get Started
Three ways in, from simplest to most control. All MAS-regulated. Prices verified Aug 2026, and always re-check before opening.
Option A: Saxo Markets SG Recommended for you
What: CHF margin lending built in. CHF sub-account with the loan at 1% (0% + 1% VIP markup, as of 18 Mar 2026); USD loan at 4.75% (SOFR 3.75% + 1%) (Saxo).
Why it fits: The platform literally documents the CHF carry trade, via Singapore sales trader Danny Khoo on 30 Mar 2026. MAS-regulated, SDIC member, in Singapore since 2006. FX hedging on the same ticket, and auto stop-out protection.
Costs: 1% CHF loan, FX spreads, no custody fees for equities. The VIP tier requires roughly S$250k+ AUM, so check your tier; the standard markup may be higher.
Best for: Your profile: new to FX, wants a guided, regulated, all-in-one platform.
Watch out: Marketing examples ignore price risk, the VIP rate needs a tier, and minimums apply.
Option B: Interactive Brokers SG Lowest cost, most control
What: Multi-currency margin accounts. Borrow CHF directly at benchmark-based rates, SARON plus a spread, among the lowest in the industry; SGD margin from about 2.587% (Apr 2026) (IBKR SG margin rates).
Why it fits: Cheapest long-term, full FX hedging toolkit with forwards and options, and global access to US bonds, ETFs and everything else.
Costs: Lower than Saxo, but DIY: you manage currency conversion, margin tiers and risk yourself. The learning curve is steeper.
Best for: You after 6–12 months of experience, or if you want to minimise fees from day one.
Watch out: No hand-holding; margin rates are tiered and reprice; the interface is dense for beginners.
Option C: Local broker + SGD income first Safest start
What: DBS/POSB, Phillip, Tiger or Moomoo. Buy SG dividend stocks, REITs and T-bills in SGD, with no CHF borrowing initially. Learn the income side first, add CHF funding later.
Why it fits: Zero FX risk while you learn. SG dividends are tax-exempt (IRAS), and T-bills are roughly 2.5–3% and near risk-free. You build the discipline before the leverage.
Costs: Low, but most local platforms have no CHF margin lending, so you cannot do the actual carry trade here.
Best for: Months 1–3 of your learning curve, or if you decide leverage is not for you.
Watch out: This alone will not reach 7%. It is the training wheels, not the bike.
Scenario · The friend who skipped the checklist
Ravi opened a CHF loan on a shiny offshore platform advertising 0.5% financing, with no MAS licence in sight. The rates were real. The fine print was not: the loan was a CFD, the stop-out level was brutal, and his cash sat in the broker’s own account. A quiet week of CHF strength pushed his equity to the stop level, the platform closed everything at a wide spread, and retrieving the leftover balance took four months. The strategy was fine. The venue was not. Every item on the due-diligence checklist exists because someone, somewhere, learned that lesson the expensive way.
Three Options to Grow to 7%
The funding side is solved: CHF at about 1%. The asset side is where 7% is won or lost. Three structures, three risk profiles.
Option 1: SG dividend portfolio, 2x Fit 7/10
Structure: CHF loan into 5–8 SG blue chips and REITs, DBS, OCBC, SIA, Sembcorp, Mapletree, Lendlease REIT per Saxo, with dividend yields of 4–6% (Saxo).
Math at 2x: 5.5% average yield × 2 − 1% loan ≈ 10% gross yield. Total return = yield ± price moves.
Risk: Concentration in SG banks and property; prices can fall 20–30% in a downturn; REITs cut dividends in recessions.
Effort: Low, buy and hold and collect dividends. Highest yield, highest concentration risk.
Option 2: USD income portfolio, 2x Fit 8/10
Structure: CHF loan into USD high-grade bonds, bond ETFs or covered-call ETFs yielding 4.5–6%.
Math at 2x: About 5% yield × 2 − 1% loan ≈ 9% gross. FX is the swing factor, USD/CHF.
Risk: US rates, credit spreads and USD/CHF. Less concentration than Option 1, and bond ETFs are liquid.
Effort: Low to medium. The classic carry structure: currency carry plus credit spread.
Option 3: Hybrid diversified, 1.5x Fit 9/10
Structure: CHF funding at 1.5x into 40% SG dividends, 30% USD bonds/ETFs, 20% SGD T-bills and cash buffer, 10% gold or global equity ETF. Rebalance quarterly.
Math: Blended asset yield of about 4.5% × 1.5 − 1% loan ≈ 5.75%, plus modest capital growth, for a 6–8% target with lower tail risk.
Risk: Lower than Options 1 and 2. Diversification dampens the single-stock and single-currency blows, and gold hedges the safe-haven spike because gold rises when CHF rises.
Effort: Medium, quarterly rebalance and a weekly 15-minute check. Matches your 20% drawdown tolerance and 3–5 year horizon.
Scenario · The hybrid in a real downturn
A scare arrives: a US credit wobble, equities down 12%, and the franc spiking 6% as frightened money runs to safety. Portfolio A, all SG banks at 2x, falls about 24%, and its REIT dividends get cut. Portfolio B, the hybrid at 1.5x, holds 20% in T-bills that are untouched and 10% in gold that rose 8% while the franc spiked, and its bonds held up better than stocks. Portfolio B loses about 9%. It then collects the carry for another year while Portfolio A is still nursing its wounds. Both made the same bet on the franc. The hybrid just made it small enough to survive the bad year, and the bad year is the price of admission to the good ones.
Roadmap: The Risk Dashboard
You asked for a dashboard to track risks on an HTML page, updated on demand. Here is what it will monitor, built from our verified rates-fx-monitor dataset: 10 years of SNB/Fed/ECB/BoJ rates plus CHF/JPY/SGD FX, data cut 1 Aug 2026.
Update cadence
You call it, and the data gets refreshed via the SNB and Frankfurter keyless APIs in about 2 minutes, then redeployed. Or a weekly cron if you want it automatic.
Sources and Methodology
All policy rates and FX come from the SNB Data Portal and Frankfurter/ECB reference rates, consolidated in our rates-fx-monitor dataset (dash_data_v3.json, cut 1 Aug 2026). Methodology: SNB sight-deposit rate (ZIG) before Jun 2019, SNB policy rate (Leitzins) after; Fed funds lower bound; ECB deposit facility; BoJ uncollateralised overnight call rate; SORA for SGD.
SNB Data Portal — policy rates and Swiss monetary data
Saxo Markets SG — "The Swiss Franc (CHF) Carry Trade with Margin Lending", Danny Khoo, 30 Mar 2026
OCBC via FXStreet — Swiss franc funding-currency weakness, 7 Aug 2026
Wellington Management — the yen carry trade unwind
MacroMicro — two key indicators for analyzing carry trade unwind risks
Business Insider — carry trade jitters, 9 Jul 2026
Interactive Brokers SG — margin rates
Exchange-Rates.org — USD/CHF 2026 history
SNB — press release archive, including the 15 Jan 2015 floor removal, cited as historical record
IRAS — tax treatment of dividends and capital gains