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COUNTRY INSIGHTS

OFZ: The yield curve has become inverted – the first time since 2017
RUSSIA ECONOMICS · In Brief · 26 Oct 2021 · 1 response

Friday’s CBR decision to hike the key rate by 75 bps (to 7.5%), accompanied by a hawkish statement from the regulator, became a negative surprise for the bond market. Despite the acceleration of inflation, which reached 7.8% as of October 20, the market was expecting a more moderate action, but t...

Economics: Rising inflation and wage expectations could complicate the 2022 outlook
MEXICO · Report · 26 Oct 2021

The average contract wages of formal sector workers experienced significant gains in the past three years that stand in contrast to the largely flat trajectory of hourly income during the previous ten years. However, those increases have not coincided with improvements to labor productivity nor e...

The De Facto End of the Spending Cap and the Central Bank’s Reaction
BRAZIL ECONOMICS · Report · 26 Oct 2021

Last week, the spending cap rule ended. The increase of the Bolsa Família program and other transfers to the needy is only part of the spending increase, whose real objective is to increase the president’s popularity and satisfy his congressional base. As could not otherwise have occurred, the ri...

Reports show the government is looking into privatizing Petrobras, concerns increase about a possible trucker driver strike on November 1 and the House begins analysis of the court-ordered payments PEC
BRAZIL POLITICS · Report · 26 Oct 2021

Guedes is in favor of selling Petrobras, however, passing a bill of this nature would be very difficult right now – there are only nine weeks left until the parliamentary recess. The opposition is participating in the truck driver meetings, therefore, it is demanding more attention from the gover...

Politics: The fate of the latest energy reform bill hinges on how PRI lawmakers line up
MEXICO · Report · 25 Oct 2021

Mexico has been drawn into a debate over what type of electric power system the country needs, and clearly there is some room for improvement. But there appears to be a serious risk that opponents of President López Obrador’s efforts to establish strict state control over the electric power secto...

Income Tax Reform may be archived and other weekly topics
BRAZIL POLITICS · Report · 25 Oct 2021

A hectic week in Brasilia: the House will try to vote on the court-ordered payments PEC in order to make room for the Auxílio Brasil program in the budget, and in the Senate, the focus is on the vote on the final report of the Pandemic CPI. The TSE will judge a case that calls for the cancellatio...

Slower third-quarter growth tells us about next year
CHINA FINANCIAL · Report · 25 Oct 2021

Special points to highlight in this issue: * Chinese third quarter growth came in well below market expectations, but these expectations had always been unrealistically high. The latest data show just how important it is to understand the various components of Chinese growth and the inverse re...

Moldova: state emergency as gas runs out
RUSSIA / FSU POLITICS · In Brief · 25 Oct 2021

On October 22 the country was driven to this decision because it does not have enough gas from its usual supplier: Russia. Russia has raised prices. Moldova is seeking affordable gas from the EU. Gazprom raised prices from USD 550 per thousand cubic meters in September 2021 to USD 790 in October ...

Essential CIS Politics: October 2021
RUSSIA / FSU POLITICS · Report · 25 Oct 2021

* Inflation and income stagnation continue to dog Russia despite there being some economic growth. * Nord Stream 2 has been completed and is being tested. * Azerbaijan held military drills with Turkey. This is to deter Iran as much as Armenia. * Uzbekistan is in dialogue with the Ta...

Guedes defends the change in the spending ceiling, the CAE holds a public hearing to discuss the Income Tax Reform proposal, and the Pandemic CPI votes on the final report tomorrow
BRAZIL POLITICS · Report · 25 Oct 2021

Guedes also called for Senate President Rodrigo Pacheco to make progress with the reform proposals. Despite the poor timing, Guede's statements should not interfere with the vote on the court-ordered payments PEC in the House. In the Pandemic CPI, Senator Calheiros recommends the indictment of 66...

Cancellation of non-tradeable bonds likely to be positive for the long end of the curve
ISRAEL · Report · 25 Oct 2021

The Finance Committee of the Knesset approved the cancellation of non-tradeable government bonds as of July 2022, paving the way for Knesset approval by November 10, 2021. We view this reform as significant, expected to increase depth and liquidity in the bond market, and possibly supportive of t...

Cancellation of non-tradeable bonds likely to be positive for the long-end of the curve
ISRAEL · In Brief · 24 Oct 2021

Non-tradeable bond issuance is likely to be cancelled in mid-2022.This will require higher tradeable bond issuance (an additional 35bn annual) in order to meet fiscal financing requirements. Demand for this increase in issuance could be less than 35bn as pension funds diversify their assets, in p...

Anything may happen, any minute
TURKEY · Report · 24 Oct 2021

An unexpectedly deep rate cut by the CBRT and a weekend outburst of expelling 10 ambassadors from friendly nations, compels us to revisit Erdogan’s decision-making capacity, once again. We offer visual evidence of his declining cognitive powers, concluding that his policy actions may not be refle...

Russian interest rate raised: again
RUSSIA / FSU POLITICS · In Brief · 23 Oct 2021

As expected on October 22 the interest rate went up to 7.5%. The country contends with a triple whammy of coronavirus surging, a second lockdown and rampant inflation. The economy has returned to its pre-coronavirus size earlier in 2021. The recovery was faster than anticipated and beat most majo...

Pandemic/political update: economic woes dominate, the epidemiological situation deteriorates
RUSSIA ECONOMICS · Report · 22 Oct 2021

Since early September, when Russia’s daily incidence rate fluctuated around 17-18K people, the number of registered cases doubled, having jumped to 36K on October 21 and over 37K on October 22. Vaccination remains slow, despite the high daily death toll – over 1K in recent days. Note that the dea...

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