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Started By
Message
re: Update pg 23: Russia,IMO, will default on its sovereign debt within six months
Posted on 1/12/15 at 7:50 am to LSURussian
Posted on 1/12/15 at 7:50 am to LSURussian
But Putin is such a great leader and a real man. This can not be possible.
0
Posted on 1/12/15 at 10:07 am to LSURussian
quote:
And today it has shot up to 609 basis points.
Finished last week at 577.
LINK
Interesting thoughts on the persistent question I've had in this thread: why is Russian CDS so much lower than these other terrible countries:
quote:
Russia seems the least likely of these countries to actually suffer payment difficulties, but much will depend on future developments in energy prices and the ruble. Greece and Ukraine are both dependent on foreign public sector lenders and their willingness to throw more good taxpayer money after bad. Neither country can expect these foreign lenders to be overly patient or willing to countenance deviations from their conditions. Given the political and economic realities in Ukraine and Greece, outright defaults can therefore not be ruled out. One needs to keep a close eye on developments in CDS spreads and bond yields over coming weeks and months, as in both cases a further deterioration of the situation would have ramifications that go well beyond the countries directly concerned. In the short term, this may be more pertinent to Greece due to its connection with the EU and the euro area, but a more pronounced economic implosion and further destabilization of Ukraine would likely also harbor more wide-ranging dangers. The happy bubble in risk assets could presumably be derailed a bit if any of the possible worst case scenarios were to become manifest.
LINK
This post was edited on 1/12/15 at 10:10 am
Posted on 1/13/15 at 9:25 am to Big Scrub TX
Posted on 1/13/15 at 9:32 am to Hawkeye95
wow. this was a predicted economic outcome after Putin took the Crimea.
At the time right wing mockers of Obama's unwillingness to put troops on the ground did not give much credence to US led sanctions.
Brought them to their knees.
Oil falling apart might have been predicted, since fracked oil was easily predicted to create a lower price.
Question for LSURussian or anyone who maybe really knows:
If Russia negotiated the return to The Ukraine of the Crimea, including its naval base and equipment, and of course the oil possibilities off shore, would the Russian economy turn around pretty fast after US led sanctions were ended?
Also, I have always wondered about this one: Is the use of the word THE before Ukraine and Crimea official anywhere (like in the Urkrainian language) or it is something the Brits made up?
At the time right wing mockers of Obama's unwillingness to put troops on the ground did not give much credence to US led sanctions.
Brought them to their knees.
Oil falling apart might have been predicted, since fracked oil was easily predicted to create a lower price.
Question for LSURussian or anyone who maybe really knows:
If Russia negotiated the return to The Ukraine of the Crimea, including its naval base and equipment, and of course the oil possibilities off shore, would the Russian economy turn around pretty fast after US led sanctions were ended?
Also, I have always wondered about this one: Is the use of the word THE before Ukraine and Crimea official anywhere (like in the Urkrainian language) or it is something the Brits made up?
This post was edited on 1/13/15 at 9:35 am
Posted on 1/13/15 at 1:50 pm to sassyLSU
quote:
@soshnick
BREAKING: @BrooklynNets are for sale, 2 sources say. Mikhail Prokhorov hires Evercore to sell the @NBA team. Story posting soon. #sportsbiz
Posted on 1/13/15 at 2:05 pm to sassyLSU
quote:The only conditions under which I can see Russia giving up Crimea and Sevastopol and the Black Sea Fleet are if it was defeated in a war.
If Russia negotiated the return to The Ukraine of the Crimea, including its naval base and equipment, and of course the oil possibilities off shore, would the Russian economy turn around pretty fast after US led sanctions were ended?
This post was edited on 1/13/15 at 2:06 pm
Posted on 1/14/15 at 4:59 pm to Iosh
Cutting government spending.
LINK
ETA They are keeping Crimea. No way they give up anything without war.
LINK
quote:
Russian government officials appealed for calm on Wednesday after predicting budget cuts and a further surge in inflation as the country faces its worst economic downturn in 15 years.
With the currency and economy wilting under the twin blows of Western sanctions and a fall in the price of oil exports, Finance Minister Anton Siluanov proposed slashing some 10 percent to most areas of the state budget.
quote:
That is a significant turnaround for the government of President Vladimir Putin, who only weeks ago told the nation in a televised address that state spending would not be cut.
Many parts of the economy, which relies heavily on public spending, will be affected, though Russia's vast military modernization program and spending on infrastructure reforms will remain untouched as the country tries to reassert its power in the face of the West.
ETA They are keeping Crimea. No way they give up anything without war.
quote:
Infrastructure spending will also likely be immune to cuts. One key upcoming project is to build a bridge connecting the Crimean peninsula, which Russia annexed from Ukraine in March. The project is provisionally valued at 228 billion rubles (about $3.5 billion).
This post was edited on 1/14/15 at 5:01 pm
Posted on 1/18/15 at 11:03 am to LSURussian
Russia experienced record outflows of capital in 2014. As the linked article below explains, almost half of the record annual outflow occurred in the fourth quarter of 2014 and was more than 4 times the outflow amount in the third quarter of 2014.
Almost half of the year's outflow in three months! The snowball is getting bigger, fast.
LINK
Almost half of the year's outflow in three months! The snowball is getting bigger, fast.
LINK
quote:I look for capital controls to be the next step announced by the Russian government.
Net outflows by companies and banks reached $151.5 billion in 2014, more than two times as much as in 2013, according to the Russian Central Bank .
The last time the level of outflows was this high was during the global financial crisis in 2008, when it reached $133.6 billion.
The fourth quarter in particular saw a huge spike. Net outflows surged up to $72.9 billion, from $16.9 billion in the previous quarter, following the drop in oil prices and the ruble's plunge.
Posted on 1/18/15 at 1:26 pm to sassyLSU
quote:
If Russia negotiated the return to The Ukraine of the Crimea, including its naval base and equipment, and of course the oil possibilities off shore, would the Russian economy turn around pretty fast after US led sanctions were ended?
Good question, however, you will recall that back when Ukraine still held Crimea, Russia had long-term leases to occupy and utilize the naval bases in the region. This makes Putin's move even more puzzling, because the Russian Navy was ALREADY using and occupying the Crimean naval bases there.
Posted on 1/18/15 at 1:29 pm to sassyLSU
quote:
Also, I have always wondered about this one: Is the use of the word THE before Ukraine and Crimea official anywhere (like in the Urkrainian language) or it is something the Brits made up?
Ukrainian people themselves are upset with reference to their country as "the" Ukraine because it's the way that this part of the world was referenced when it was part of the Soviet Union.
Ukraine is a sovereign nation. The Ukraine was a region of the old Soviet Union.
Also, Ukrainians do not find it funny when you tell them, "Ukraine is weak", because they are not fans of the Jerry Seinfeld Show.
This post was edited on 1/18/15 at 1:30 pm
Posted on 1/18/15 at 2:52 pm to sassyLSU
quote:The Russian economic outlook would improve gradually if the Western sanctions were lifted but as long as oil prices stay where they are, Russia can't come close to balancing its national budget and therefore its economy would not improve significantly, IMO.
If Russia negotiated the return to The Ukraine of the Crimea, including its naval base and equipment, and of course the oil possibilities off shore, would the Russian economy turn around pretty fast after US led sanctions were ended?
quote:Actually, neither the Ukrainian nor the Russian language has the word 'the' in them. Nor do they have 'a' or 'an.' No 'articles' as we refer to those words.
I have always wondered about this one: Is the use of the word THE before Ukraine and Crimea official anywhere (like in the Urkrainian language) or it is something the Brits made up?
The tense of the noun and verb used in their languages tells the listener/reader if the person speaking/writing is referring to a singular or plural subject.
When I was working in Ukraine and a local person referred to his country when speaking English, he never used 'the' in front of Ukraine. Just....Ukraine. So I have since tried not preface Ukraine with the word 'the' when I'm writing or speaking.
Posted on 1/19/15 at 7:58 pm to LSURussian
The Central Bank of Russia is anticipating Russia's sovereign debt being downgraded to junk status soon. So in anticipation of it happening the CBR has issued a new policy that Russian banks will be allowed to keep the credit rating they had prior to Russia's takeover of Crimea.
This is significant for two reasons:
1) Under international banking rules a bank cannot have a credit rating higher than the credit rating of its home country's sovereign debt credit rating.
2) The level of primary capital (basically equity capital) banks must hold increases as the credit rating of the banks decrease.
So if Russia's sovereign debt rating is lowered to junk status, which it will be either later this week or sometime next week, all of the Russian banks would be required to raise equity capital to meet the higher capital requirements resulting from having their credit ratings lowered to match the sovereign rating of Russia.
The cost of capital is at a premium in Russia these days. That means many of the big Russian banks would either have to pay high costs for raising new capital or they would not be able to raise the required new capital, resulting in their being considered under capitalized according to international standards.
So the Central Bank of Russia has basically said it will ignore accepted international banking standards and rules by freezing their banks' credit ratings at what they were early in 2014 thus negating the need for their banks to have to issue additional capital.
Once again Russia thumbs its nose at the rest of the developed world's rules.
LINK
This is significant for two reasons:
1) Under international banking rules a bank cannot have a credit rating higher than the credit rating of its home country's sovereign debt credit rating.
2) The level of primary capital (basically equity capital) banks must hold increases as the credit rating of the banks decrease.
So if Russia's sovereign debt rating is lowered to junk status, which it will be either later this week or sometime next week, all of the Russian banks would be required to raise equity capital to meet the higher capital requirements resulting from having their credit ratings lowered to match the sovereign rating of Russia.
The cost of capital is at a premium in Russia these days. That means many of the big Russian banks would either have to pay high costs for raising new capital or they would not be able to raise the required new capital, resulting in their being considered under capitalized according to international standards.
So the Central Bank of Russia has basically said it will ignore accepted international banking standards and rules by freezing their banks' credit ratings at what they were early in 2014 thus negating the need for their banks to have to issue additional capital.
Once again Russia thumbs its nose at the rest of the developed world's rules.
LINK
Posted on 1/19/15 at 8:58 pm to LSURussian
If you like your credit rating, you can keep it. Why follow the rules if that's true?
I don't see this backfiring, at all.
I don't see this backfiring, at all.
Posted on 1/19/15 at 9:15 pm to Asgard Device
We might see a significant sell off of the Russian banks' stocks when the Moscow stock exchange opens in a few hours.
Or, knowing how Russians think, they may believe the CBR's rule change is good news for banks which will have a junk bond credit rating within two weeks in everyone's eyes except the Central Bank of Russia. So, the Russian bank stocks might take off!
Or, knowing how Russians think, they may believe the CBR's rule change is good news for banks which will have a junk bond credit rating within two weeks in everyone's eyes except the Central Bank of Russia. So, the Russian bank stocks might take off!
Posted on 1/19/15 at 10:09 pm to LSURussian
quote:RSX is around 15 now. With any luck it will drop another 25-30% over the next couple of months. Would match its Jan09 (Great Recession) lows. At that point I'd be awfully tempted to take a position.
We might see a significant sell off of the Russian banks' stocks when the Moscow stock exchange opens in a few hours.
Or, knowing how Russians think, they may believe the CBR's rule change is good news for banks which will have a junk bond credit rating within two weeks in everyone's eyes except the Central Bank of Russia. So, the Russian bank stocks might take off!
Posted on 1/21/15 at 9:08 pm to LSURussian
The Russian government's bond auction today fizzled. The government hoped to raise 5 billion rubles but was only able to attract 1.1 billion at an interest rate over 15%.
LINK
LINK
Posted on 1/21/15 at 9:15 pm to LSURussian
quote:
The government hoped to raise 5 billion rubles but was only able to attract 1.1 billion at an interest rate over 15%.
Yikes. Should have made it 20%.
This post was edited on 1/21/15 at 9:15 pm
Posted on 1/21/15 at 9:25 pm to Asgard Device
quote:Government bond auctions don't work that way.
Yikes. Should have made it 20%.
Bidders place bids based on the % rate they require to earn in order to loan the government money. The govt then decides how much interest it can afford to pay without distorting the debt market's structure and how much it can afford to pay.
That's why the process is referred to as a bond "auction."
With the credit rating agencies primed to downgrade Russian sovereign debt to junk status any day now, Russia will see a dramatic increase in its borrowing rates soon as it is.
Posted on 1/21/15 at 9:36 pm to LSURussian
quote:
Yikes. Should have made it 20%.
Government bond auctions don't work that way.
Oh yeah?
quote:
The govt then decides how much interest it can afford to pay
Posted on 1/21/15 at 9:37 pm to LSURussian
I am certainly not a fan of Putin, but I wonder if an economic collapse in Russia could lead to an (even more) aggressive military policy similar to Germany in the 1930's?
I think that it is worrisome that Putin remains so popular in Russia despite the recent economic conditions. I wouldn't be surprised if he continues his expansion into the Ukraine, and possibly other former Soviet republics.
I think that it is worrisome that Putin remains so popular in Russia despite the recent economic conditions. I wouldn't be surprised if he continues his expansion into the Ukraine, and possibly other former Soviet republics.
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