US Equities rose as traders hoped for a possibility of decreasing tensions over Ukraine. Oil was above $92 a barrel as traders evaluated the potential disruptions in supplies. US Equities and Bonds Traders remain on the edge about risks bordering Russia/ Ukraine tensions. Focus today will be on latest FED minutes. This may shape views on how quickly the Fed will hike interest rates and reduce its bond holdings of circa $8tr in the coming months. The S&P 500 rose 1.6%, The Nasdaq 100 rose 2.5% while the yield on 10-year Treasuries was at 2.04%. West Texas Intermediate crude was at $92.67 a barrel, up 0.6% as Gold closed at $1,855.41 an ounce, up 0.1%. The rise in PPI from in January by 1.0% against an expected 0.5% should reinforce bets of aggressive FED hikes.
Rates sold yesterday as Russia/Ukraine tensions continued to show signs of thawing following Chancellor Scholz’s meeting with President Putin. Yield on 10Y DBRs closed 2.5bps higher at 0.308% and opens on a selling note trading 0.323% at 08.30 GMT. ECB officials doubled down on the pushback against rate hikes Bank of France chief Villeroy de Galhau saying the end of the asset purchase programme should not necessarily trigger a rate hike. 10Y BTPs closed a basis point firmer with yields at 1.872%; the however open weaker, at 1.893% at 08.30 GMT.
Ethiopia’s parliament on Tuesday voted to an early end to a six-month state of emergency which will take place effective immediately. This latest development brings hope to an end of the bloody conflict between the government and rebellious Tigrayan forces that has persisted for a while now. The war in Africa’s second-largest nation has largely broken up to a stalemate, as diplomats continue to help in mediating between the two sides and are cautiously optimistic that progress towards peace will be established. This move has also been welcomed by the U.S. State Department as an “important step” and went on further to call for the immediate release of all those arrested or detained without charge under the state of emergency. Yields on Ethiopia’s sovereign bond (ETHOPI 6 ⅝ 12/11/2024 REGS Corp) since the start of the year (22.29%) have since fallen c.480bps as stability continues to return to the country. Despite the uptick seen in yields amongst SSA sovereigns during the past week, yields on the Ethiopia paper have gradually fallen c.70bps (07/02/2022 – 18.05%; as against yesterday’s closing levels of 17.30%) compared to its counterparts in the SSA region which seems like a positive sign for investors.
As expected the day before, the Tuesday had a positive start. The news that some Russian troops are pulling back from Ukraine border gave a strong impulse to the Russian market. RUSSIA 30 increased from 106.5 to 107.5 level; RUSSIA 47 moved from 104.5 to 108 level. RUBUSD also moved higher and is trading now around 75 lvl. The MICEX Index rose 3.5%, RTS increased by 5%. The general positivity was overshadowed by the State Duma support to a direct Putin’s appeal to recognize the independence of the DNR and LNR, which would be regarded by Kiev as Russia’s withdrawal from the Minsk agreements. At a three-hour meeting between Scholz and Putin in Moscow yesterday, Putin said that GAZPROM will continue to supply gas through Ukraine even after the end of the transit contract in 2024. Putin also noted that Russia provides about 1/3 of Germany’s energy needs hinting at the close ties between the two economies and the importance of launching Nord Stream 2. The focus today remains on the news published by some media about the “date and time of the beginning of the Russian invasion.” US President Biden said that the United States has no confirmation of the withdrawal of Russian troops and about 150,000 Russian troops remain near the borders of Ukraine.