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RUSSIA
- Geopolitical tensions with Ukraine continue to ratchet up this week with the impact being felt across the breadth of Russian markets. Since 12 November, the 5Y CDS has risen +27bp with Western & Ukrainian media alluding to plans to invade Ukraine early in 2022 under the auspices of Ukraine making military provocations in the Dobass and building its military presence on Russia's border.
- Over the weekend, US Senators called for sanctions on debt, Nord Stream 2 and top-ranking officials, should Russia make any further aggressive moves towards Ukraine – resulting in the sharp sell-off in rates, FX and stocks today – which has also been compounded by oil weakness and broad risk-off.
- Russia has so far been voicing its commitment to the Minsk agreements, and kept out of visual counter displays in the Black Sea, but is sounding increasingly frustrated and concerned about the situation.
- Moreover, Western sales of advanced weaponry to Ukraine continue to annoy Russia and put Kiev is a better position to inflame the situation in the Donbass further – for example; the strike on DPR forces using Turkish drones.
- Putin recently reasserted Russia's red lines on Western presence so close to its borders, and is due to hold meetings with the US in Dec-Jan. In terms of next steps, we seem to be continuing to escalate with uncertainty still high.
- The fear is that Russian frustration turns into military exercises that would be deemed very inflammatory by the West, but for now it's just tit-for-tat comments with no signs of de-escalation just yet.
- Risk aversion is currently keeping Russian assets on the back foot, similar to the situation in March – but this time the military presence from Ukraine and the backing from the West seems more pronounced. Most experts remain convinced that there is little utility in Putin invading Ukraine, but see the situation remaining tense until one side gives ground.
- This could potentially be by Russia pulling back its troops or a meeting being to discuss de-escalation and implementation of the Minsk accords.
Russia 5Y CDS
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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