The ruble is at the mercy of the risk of sanctions
The ruble is in the grip of two opposing non-fundamental factors. On the one hand, the media widely quoted phrase, allegedly said yesterday the special envoy of the White house on national security, John Bolton, that “new sanctions against Russia in near future will not be” (actually, he said another phrase – that a decision on additional sanctions on the so-called “case Skrypalia”, which is actively pushing the British Prime Minister Theresa may, Washington is not accepted).
There is no need to dwell on the complexity of the relationship between domestic factor markets with sudden penalties. Recently a real sword of Damocles was widespread discussion of the unenviable fate of Russian state-owned banks, which will be quite bad if new American sanctions will affect their foreign dollar accounts.
It is easy to understand the genuine euphoria, which plunged the Russian investors are suddenly considered that about the most hated and almost unpredictable aspect of the undermining of their positive sentiment can be deleted from the agenda – well, even if some more or less long time!
In addition, after an equally unexpected increase in estimates of the growth rate of Russia’s GDP in 2019, rating Agency Moody’s – the last one this morning said that next year there is a fairly high probability of increasing the sovereign rating of Russia to investment level. But this is specific, not contrived, positive!
On the other hand, the results of the next placement of OFZ in the amount of 20 billion rubles at yesterday’s auction has upset many of us. Factor mushroom picker who had slept through the early Saturday morning and went into the forest with the basket on Sunday afternoon (bearing in mind the conflicting placement papers of Bank of Russia (COBRAS) on Tuesdays, which does not create the best Foundation of liquidity on the eve of OFZ placements on Wednesdays), we wrote repeatedly. Nevertheless, the market is still desperately hoped that the demand for these securities to a much greater extent creates domestic institutions, and therefore concerns of sanction restrictions from non-residents will not affect the results of the third after a long break auction.
The miracle did not happen. The second tranche in the volume of supply of 10 billion rubles was barely able to place 42% of the proposed issue at the fixed rate of return cut-off of 8.68%. Although the first tranche was placed fully, but the yield was even closer to absolute rational threshold of the Ministry of Finance at 9% (let us recall for comparison about the yield offered by Russian banks on ruble deposits!).
The sum of the above divergent factors of influence on the ruble, we got it slow subtle weakening of the dollar from yesterday’s high-level 65,04 rubles per dollar to the current of 65.64 as of 13:00 GMT. In tandem with the Euro, the Russian ruble is trading at 74,88 rubles per single unit of account in the Eurozone – better historical lines of psychological watershed at 75.
Waiting for the press conference of the ECB head Mario Draghi after the next session to determine the key interest rates in the Eurozone. Let’s see how the Maestro will be able to comment on the situation with the Italian revolt fiscal disobedience (and by this hateful themes Signor Draghi to disassociate himself with all his desire does not work)!
“International financial center”