Russia: a brief market watch

RUSSIA ECONOMICS - In Brief 18 Jul 2024 by Evgeny Gavrilenkov
The Russian FX market operates in a specific mode in the aftermath of US sanctions against the local stock exchange and its subsidiaries, which were introduced about a month ago. Problems with the settlement for imports reduced the demand for FX. The ruble became too strong, and this recent appreciation can hardly be justified by economic fundamentals – especially because the market keeps evolving into a kind of mixed OTC mode (i.e., a mix of stock exchanges and OTC transactions), and its functionality is limited. We suppose it will take several months for the market to sort out various issues and develop the 'new normal' regime. To support this process, the government cut the requirement for obligatory FX sales by exporters from 80% to 60% and then to 40%. Most likely, the government will make another step in this direction soon - potentially, it will remove the requirement completely. As inflation remains elevated, it leaves no choice for the CBR apart from hiking the key rate on Friday next week. The regulator has to revise its current forecast for 2024 CPI (4.3-4.8%) as in June, the MTD inflation reached 8.59 y-o-y and 3.88% MTD. In July, inflation keeps climbing up. We suppose that the rate hike will be 100-200 bps, and the overall tone of the statement will remain hawkish. The demand for fixed-rate government bonds will remain limited, and the Finance Ministry will try to place more floating rate papers. Currently, the issuer is ready to offer a 40 bps premium to RUONIA, while the market desires 70+ bps. Hence, the government had limited success placing bonds on the primary market. However, we still see significant potential demand for long-term Government bonds,...

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This 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 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 or its contents.