Early market intervention in the FX market rescued the Ruble, but that has now been overwhelmed by more selling pressure with the Russian currency back near earlier record lows…
So far, the response by the central bank is more measured than eight years ago when the conflict in Ukraine first flared.
“If the central bank is in the market then it’s doing so carefully — but the effect has been achieved,” said Georgy Vashchenko, head of trading operations at the Freedom Finance brokerage.
“The ruble will most likely remain under pressure in the near future, but the Bank of Russia is ready to smooth out any emergencies.”
At the same time, despite halting trading early on in the vain hope of some ‘calm’ returning, the Russian stock market is a bloodbath with Bloomberg reporting over $250 billion in market cap being wiped out.
The MOEX stock index traded down 35% today with shares of Sberbank PJSC, Russia’s biggest lender, down 49%, while natural-gas giant Gazprom PJSC traded 40% weaker.
In fact, in USD terms, the MOEX is down a stunning 60% in the last 6 days alone…
Russia’s sovereign bonds plummeted, taking some to distressed levels, and the nation’s credit-default swap premium soared above 900bps…
Russia, obviously, is not alone, as Ukraine’s FX and bond markets are a disaster.
Admittedly in very low liquidity environment, the cost of protecting against a Ukraine sovereign bond defaults has exploded higher and are now trading upfront (equivalent to around a 2700bps premium), signaling an 80% chance of default, according to data compiled by ICE.
Bond yields are correspondingly exploding to their highest since restructuring in 2015…
“Uncertainty is huge and the situation can change every second and this is reflected in the huge bid – offer prices and low to almost zero volumes,” said Jochen Felsenheimer, a managing director at XAIA Investment in Munich who trades credit default swaps and bonds.
