The Russian market: between a rock and a hard place

RUSSIA ECONOMICS - Report 16 Feb 2022 by Evgeny Gavrilenkov and Alexander Kudrin

The Russian markets have been hit strongly in recent months. The situation became even more colorful as inflation accelerated not only in Russia, but also globally. This added extra flavor and intrigue. As Russian inflation reached 8.7% in January, while that in the US hit 7.5%, not too different from Russia’s, the combination of the Fed’s zero rate and Russia’s recently hiked 9.5% key rate also looked peculiar. OFZ yields moved up all along the curve and inverted it.

The fact that the movements in the short end of the curve were far greater than those in the long end of the OFZ curve shows that the Russian market in aggregate is dominated by domestic players and domestic developments. In the short end of the curve, domestic factors dominate completely, while foreign buyers/holders of OFZ play a more important role in the long end. As disinflation is expected this year, this inversion is likely to be temporary. The behavior of foreign holders can be also seen in the FX market, which is quite strongly entangled with the OFZ market (and stock markets as well). The correlation between the OFZ yields in the long end and the exchange rate is quite clear.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This report is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This report is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this report or its contents.