A seeming positive feedback emanating from the ongoing negotiations between Russia & Ukraine and China’s move to ease regulations on foreign listings sent equity prices northwards. The S&P 500 closed 2.1% higher at 4,262.45 while Nasdaq 100 increased by 3.2% to 12,948.62. WTI crude oil was at $98.58 per barrel on the hopes of progress in peace talks. The 10-year UST yield was at 2.18% ahead of the FED meeting outcome. Demand for gold, which is considered a haven asset, eased, and remained stable with the price at around $1,915.00 per ounce. FOMC monetary meeting kicked off yesterday and a decision is due today. Fed is widely expected to announce a 25-basis point increase. Markets expect a total of seven rate hikes this year and the Federal Reserve must also consider the risk to economic growth due to the war and sanctions imposed on Russia. Beyond the conclusion of the policy meeting, we are also watching today advance retail sales for February with a 0.4 m/m rise expected. Import Price Index is forecasted to show 1.6% increase. Empire Manufacturing Index published yesterday showed a contraction in March to -11.8.
Early spike in core rates this session ahead of the FOMC decision with 10Y DBRs up some 5bps from Tuesday’s closing 0.332% level. The move follows Tuesday’s steady showing where the benchmark bunds traded within a 4bps range ultimately closing just firmer for the day. Peripherals also opened weaker having also moved firmer on Tuesday with 10Y BTPs shedding 6.6bps to close 1.814%; the same were 1.854% at 07.45GMT. European equities recovered from session lows on Tuesday as market sentiment turned positive for risky assets but ultimately fell short of reversing losses with the Stoxx 600 closing 0.028% in the red having sunk as low as 2.28%; the index opens firmer following Wall Street’s uptick, up 1.79% at 08.10GMT.
Russia is due to pay $117.2 mln in coupon payments for RUSSIA 23’s and RUSSIA 2043 today. These bonds are currently trading at around 20-25 levels. Benchmark RUSSIA 47’s is up at 11.5 from 10 yesterday. The sanctions have restricted dollar payments for the Russian government, but OFAC may issue a license allowing such payments before the end of the day. Without a license, Russia can only make payments in rubles, which would mean a technical default. A default may not entail any immediate negative consequence, but it will make it more difficult for Russia and Russian companies to get finance from abroad in the future. RUSSIA 5Y CDS remains at extremely high levels at 2700 bp, after hitting 3500 bp at the beginning of the week. RUBUSD rose 3.5% from 114 to 109. Trading on MICEX is still closed. Meanwhile, Ukrainian President Volodymyr Zelenskyy said negotiations had become more productive. The next round of negotiations is due today.
A firm start to the space this morning after we experienced two days of a tamed market with little RM coming into the space. The space now looks to regain most of the losses seen in the past two days. IVYCST did see some profit taking between its euro vs dollar denominated papers. The likes of KENINT & NGERIA seemed to push higher as a bit of demand was witnessed. The latter saw much of its demand centred across and above the 10yr curve. GHANA looked to have seen some support across the long end of their curve with bonds clearing above the 60 handles. Fresh news emanating from Nigeria has seen the finance minister (Zainab Ahmed) announce that the government plans to tap $2.2 billion this month or next of the money it raised from their Eurobond issue/sale last year and target more local borrowing in 2022 to help fund its petrol subsidies as oil prices rise. Oil prices seem to have recovered its recent losses as part of a broader market rally and Brent is currently at $102.45/bbl. Attention/Focus today turns to the FED and its expected announcement to raise rates in an attempt to combat the growing inflation trend.