Russia plans another rate hike as inflation heats up

US stocks closed mostly higher on Monday with the NASDAQ and the S&P closing at record highs. The NASDAQ led, up 0.98%, as the FTC’s antitrust lawsuit against Facebook was dismissed while the S&P rose 0.23%. The DOW shed 0.44% however following over-3% slides in Boeing and Chevron. Yield on 10Y USTs closed 5bps lower at 1.4765%.

Bundesbank President Jens Weidmann said upside risks to euro-area inflation abound even as the ECB has maintained that inflation trends would be different from what has been observed in the US. Weidmann cited oil prices as one of the main push factors but emphasised that ECB monetary policy aimed at medium term price stability, not short term. The euro closed lower at $1.1925 while yield on 10Y DBRs shed some 3.5bps to close at -0.190%.

Asian stocks slipped for a second day as a flare-up of COVID-19 infections gripped the region. The HANG SENG led the slide down 1.05% while the NIKKEI shed 0.81%. The ASX closed a more muted 0.08% lower as the country remains under lockdown after an outbreak of the Delta variant of COVID-19. The CSI also closed 1.15% lower even as the World bank upped the year’s growth forecast from 8.1% to 8.5%.

The Bank of Russia is considering a rate hike of as much as 1% at its July meeting to counter heating inflation according to Governor Elvira Nabiullina. Annual inflation rose to 6.02% in May prompting the central bank to up the benchmark rate by 50bps to 5.5% but this appears insufficient as Nabiullina remarked that inflation acceleration is not transitory as in other countries. The ruble closed firmer at 72.1224 on the dollar while the yield on RUSSIA 30s was little changed about the 1.66% area.

Kenya’s cumulative debt relief for 2021 under the DSSI programme will amount to $711 million according to the IMF. Relief for the second half of the year will total $361 million while first half relief amounted to $350 million; the H1 estimate had been about $680 million according to the DMO. With a ballooning debt-to-GDP figure of about 81%, the country also seeks to replace the nominal ceiling (KES9 trillion) with a medium-term anchor of 55% in present value terms. KENINT 32s were flat, trading about 6.33%.