The value of the ruble has returned to pre-invasion levels [1]. But I’m more concerned about currency pressure. There we are at sea.
FX market stress is measured in a variety of ways, but is usually a weighted average of currency depreciation, reserves and (possibly) policy rates, namely:
Electromagnetic Pulse = αΔs – βΔresource + γΔA generation
where α, β, and γ are parameters that are usually the inverses of the variances of the correlated variables, and resource (foreign exchange reserves normalized by monetary base) and A generation May be related to the core country (usually the US).
The first is the monetary value of the past ten years:
Our observed policy rate:
However, for reserves, the Central Bank of Russia yesterday in its website:
To mitigate sanctions risks, the Bank of Russia has updated the disclosure format for the management of international reserves, foreign exchange and gold assets in the Russian Federation.
From March 31, 2022, the Central Bank of Russia resumes publishing the total value of the Russian Federation’s international reserves on a daily and weekly basis.
Information on the management of foreign exchange and gold assets as of January 1, 2022 will be disclosed in the Bank of Russia’s 2021 annual report. The Central Bank of Russia will suspend the issuance of foreign exchange and gold asset management reports from January 1, 2022.
Therefore, we only have data (international reserves) as of February in the graph below:
In addition, part of the job of containing the rise in EMPs is done through strict capital controls.from Reuters:
Russia has also imposed restrictions on the flow of funds that could be diverted to unfriendly countries in considerable quantities,” Russia’s central bank said in its first detailed explanation of the reasons behind its decision.
These include capital flow restrictions, a ban on foreign investors from selling securities, a ban on withdrawals from the Russian financial system, and the need for special state approval to make payments to debt holders in “unfriendly countries.”
So, the ruble is really back where it started. But we don’t actually know where some of the other variables are now.
Among other financial developments, as of today (WorldGovernmentBonds.com):
Last update: 31 March 2022 20:15 GMT+0
This Russian 10-year government bond is having a 11.105% yield.
10-year vs 2-year bond spread Yes -157bp.
The yield curve for long and short maturities is inverted.central bank interest rate Yes 20.00% (Last modified February 2022).
Russia’s credit rating is ccaccording to Standard & Poor’s.
current 5 Year Credit Default Swap Quote is 412.48 The implied probability of default is 6.87%.
However, the CDS offer date is February 28th…
