U.S. President Joe Biden’s statement on the mild initial sanctions to be imposed on Russia saw a mixed market performance. However, officials have cautioned that these could be scaled up. Consequently, Nasdaq 100 futures rose 0.7% to close at 13,928 while S & P 500 futures rose 0.5% to close at 4,310. The yield on 10-year US Bond rose 1pb to 1.94% from a previous level of 1.93% and Gold was at $1,897 from $1,898.90 an ounce, down 0.1% as scramble for haven assets eased. Oil prices oscillated as traders gauged these risks and the potential return of supply from Iran. WTI crude closed at $91.71 per barrel, down 0.2%. Investors are still unsure if the imminent rise in cost raw materials that may be caused by the stalemate will prod the US FED to be more aggressive in raising interest rates. Meanwhile, top U.S. diplomat Antony Blinken announced that a diplomatic meeting scheduled this week with Russian Foreign Minister Sergei Lavrov has been cancelled. Also, U.S.-listed Chinese stocks have continued to decline as worries over Beijing’s regulation of its Tech sector resurfaced. Consequently, Chinese stocks which are mainly tech names are facing pressure as investors off load shares in growth equities with the expectations of rising interest rates, affecting the attraction for highly valued shares.
UBUSD added about 90 kopecks to 80.20 from 79.30 lvl, despite the sanctions. Yesterday US President Joe Biden imposed a first wave of sanctions on Russia after Vladimir Putin recognized the independence of two rebel-controlled regions in eastern Ukraine. Sanctions will target the following:
– Two large state-owned Russian bank’s VEB and Promsvyazbank and their subsidiaries.
– restriction of EU investors from trading in Russian state bonds issued after march 2022.
– Russian elites and their families.
– Certification of Nord Stream 2 pipeline project.
Biden said that Russia still has diplomacy options to de-escalate situation but warned that Washington was prepared to take further actions if Russia invades Ukraine. Earlier the EU agreed new sanctions on Russia that will blacklist more politicians and officials, restricting by EU investors from trading in Russian state bonds in secondary market, and target imports and exports with LPR and DNR. Russian main indices, which failed at the morning trading session by 7-10% in anticipation of new sanctions, won back most of the losses and even went up. The MICEX increased by 1.5% to 3085 lvl by the end of the day, the RTS dollar index rose by 1.6%, and closed at 1225 lvl. Russia 47s decreased from 98 to 95 lvl. Russia 28 closed at 136 lvl. Main exchanges will be closed today, 23rd February 2022 as Russia celebrates defender of the Fatherland’s Day.
A weak session in Latam yesterday, as the escalation of the Russia-Ukraine crisis, a selloff in USTs, as well as some supply announcements in CHILE and PERU drove the buyers away from the risk in the region. IG risk underperformed on the day with CHILE, COLOM and PERU all down 1.2-1.5 points in the long end. MEX, PANAMA and URUGUA followed, each down around 75c in the long end. BRAZIL was slightly stronger, down only 25-30c in the long end. PETBRA and PEMEX also kept sliding, both down 20-30c in 30Y sector, however it’s interesting to note that we have seen some axed buyers of PEMEX from the street yesterday finally stepping up to snatch some bonds, helping to absorb some of the selling pressure.
Bunds opened about steady following yesterday’s whipsaw; having rallied at the open, 10Y DBRs closed at 0.246% – 3.7bps higher than Monday’s close and 10bps above session lows. European equities also opened firmer continuing yesterday’s turn to positive – the Stoxx 600 was up 0.93% at 8.15 GMT. On the data front, we get Eurozone January CPI data with expectations of a 5.1% reading, just slightly higher than December’s 5.0%. Peripherals were weaker at market opening,10Y BTP yield went up about one basis point from yesterday’s close.
Tensions between Russia and Ukraine continued to take center stage into this week of trading. This brought about a downtrend in and around markets with the Emerging Markets not being left out. In the Sub Saharan African Sovereign debt market, we saw the SSA sovereign debt market bear the brunt of such tensions. Today we look at ANGOLA’s sovereign debt which like its counterpart NGERIA has so far ridden the elements that have suffered the SSA sovereign debt space coming into 2022, especially with the S&P rating agency improving its opinion on the quality of the sovereign credit from CCC+ to B-. Angola has so far negotiated adjustments to its financial program with the IMF to the tune of $4.5bn within the past 3 years which has led to them having sufficient budgetary cushions in foreign reserves and with oil prices at $90/bbl levels despite the country’s budget estimate working with oil at $70/bbl. Earlier this year, it did announce its plan to return to the international debt markets in Q1 to issue an indicative amount of $2.8bn according to the debt plan published this month. The nation plans to spend most proceeds from the $2.8 bn sale on refinancing debt with the proceeds helping to ensure that maturity peaks in the coming years are levelled out. It is also worth noting that the nation’s financing needs have fallen to 13% of gross domestic product from 15% in 2021. As earlier stated about the likes of Nigeria and Angola riding the elements that have suffered the SSA debt market space. Putting it into perspective, yields on the long end of their sovereign debt (ANGOL 9 ⅜ 05/08/2048 REGS Corp) despite beginning the year at 9.60% and trending upwards c.40bps to 10.02% after the first interest hike announcement by the FED, those yields have somewhat trended down and currently are at about 9.8% compared to the likes of GHANA (GHANA 8.627 06/16/2049 REGS Corp; start of the year – 9.5%; interest rate hike – 10.05%; current – 9.9%) which seem to have suffered more. As we head into the end of Q1, a bit more attention would be on their expected issue and how much investors would be willing to take a gamble on the improving economic conditions that we have seen in Angola coming into 2022.