From the National Bank of Ukraine:
15.04.2014 press release
The National Bank has passed the decision to temporarily disconnect 14 banks from the System of Confirming the Agreements in the interbank foreign exchange market. The regulator resorted to this measure given the actions undertaken by these banks in the foreign exchange market that have a destabilizing effect on of the hryvnia exchange rate and create negative expectations about the future hryvnia exchange rate dynamics.
Not much market reaction yet to reports of an “anti-terrorist operation” in Ukraine apart from gold, which had broken through a key resistance level before Russia said that its neighbour is close to civil war. Read more
The prospect of selling any sovereign territory to resolve disputes may seem like a taboo — especially so when it comes to the conflicted territory of Crimea. However, Joseph Blocher and Mitu Gulati, both law professors at Duke University, argue that such a “market” should in future be considered in public international law.
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At least Nomura acknowledge the absurdity… anyway, all Ukrainian roads lead to political uncertainty.
This guest post on the Ukraine crisis is from Jorge Mariscal and Alejo Czerwonko, emerging markets chief investment officer and emerging markets economist, respectively, at UBS Wealth Management.
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There’s a familiar name on the latest Specially Designated Nationals List in the US sanctions against Russia…
TIMCHENKO, Gennady (a.k.a. TIMCHENKO, Gennadiy Nikolayevich; a.k.a. TIMCHENKO, Gennady Nikolayevich; a.k.a. TIMTCHENKO, Guennadi), Geneva, Switzerland; DOB 09 Nov 1952; POB Leninakan, Armenia; alt. POB Gyumri, Armenia; nationality Finland; alt. nationality Russia; alt. nationality Armenia (individual) [UKRAINE2]… Read more
When your creditor takes some of your territory — can you make that territory take some of your debt? Mitu Gulati, a law professor at Duke University, last wrote for us on Russia’s $3bn Ukrainian bond. With Russia reinforcing its annexation of Crimea, Mitu considers Ukraine’s options with its debt after the secession.
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Or, why investors might be less than sanguine about sanctions against Russia.
We could start with the OFZs.
What to do when your creditor invades? Beyond its occupation of Crimea, Russia remains a lender to Ukraine — even as IMF teams ponder the Kiev government’s financial sustainability. Mitu Gulati, a law professor at Duke University, considers both sovereigns’ options.
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Vladimir Putin’s gave his first official address on the Ukraine crisis on Tuesday.
Among the key points made (via Reuters, and emphasis on our favourite snap):
RUSSIA’S PUTIN SAYS USE OF FORCE IN UKRAINE IS A CHOICE OF LAST RESORT
PUTIN SAYS RUSSIA RESERVES RIGHT TO USE ALL OPTIONS IF THERE IS LAWLESSNESS IN EASTERN UKRAINE
RUSSIA’S PUTIN SAYS THOSE CONSIDERING SANCTIONS SHOULD THINK OF THE DAMAGE THEY MAY INCUR
RUSSIA’S PUTIN SAYS ALL THREATS AGAINST RUSSIA ARE “COUNTERPRODUCTIVE AND HARMFUL”
PUTIN SAYS RUSSIA READY TO HOST G8, BUT IF WESTERN LEADERS DON’T WANT TO COME “THEY DON’T NEED TO”
Depends on how confident you are that the market and economists can predict Putin’s next move, we suppose. Read more
Clear enough where Russian assets are concerned at least… the CBR has
gone to war just hiked by 1.5 percentage points to put a stop to the rouble’s tumble.
The central bank did not mention Ukraine in its statement, but said the decision to raise rates was aimed at preventing “risks to inflation and financial stability associated with the recently increased level of volatility in the financial markets”…
From the introduction to a new IIF paper:
The already acute financial pressures appear to have intensified further in recent weeks, with bank deposits falling sharply, the government out of funding and foreign exchange reserves likely to have tanked to as low as $12 billion by late February. The political change in Kiev has increased odds that Ukraine would receive the urgent financial assistance needed soon enough to avert default. With the Russian bailout likely to be put on hold, this assistance should amount to at least $20 billion this year alone. However, this would require the prompt formation of a new government able to undertake the reforms needed to alleviate the acute macroeconomic imbalances and put the economy on sound footing.
Notwithstanding the approval and publication by the Central Bank of Ireland of the prospectus dated 17 February 2014 in relation to the undermentioned proposed issue of securities, the Issuer hereby confirms that no such securities will be issued.
UKRAINE REPRESENTED BY THE MINISTER OF FINANCE OF UKRAINE Read more
Moscow doesn’t send tanks into revolting former vassals any more. It sends dollars.
For anyone who decides to follow the money when it comes to Ukraine’s split between the EU and Russia, the consequences can sometimes be grimly surreal when it gets to the prosaic matters of bond finance. Read more
Get yourselves an FX reserve-friend, we said…
That’s the Ukrainian hryvnia versus the US dollar on Wednesday — via Reuters. The market’s illiquid and in local trading the rate might have gone through 9. But in case you were curious, the guess is that the fall is down to half political messiness, half general EM messiness — and that it isn’t over. Read more
For those lucky enough not to recognise the FX shorthand… that’s a weak pun involving the overvalued and pegged Ukrainian hryvnia.
It’s alluding to the idea that Ukrainian households might, as protests over the rejection of an EU free trade deal last month continue, decide to start converting their deposits into FX. They have form.
That would put a whole load of pressure on already skimpy FX reserves — which at about $20bn are down to covering about two and a half months of imports, below the fairly arbitrary three months that makes the IMF all sweaty. Read more
Viktor Yanukovich, the Ukrainian president, has promised Europe that it will not face the natural-gas supply disruptions that have plagued it in recent years, the FT reports. The pledge, made while Mr Yanukovich was in Brussels for Monday’s European Union-Ukraine summit, was seconded by Sergei Shmatko, Russia’s energy minister. But in an interview following the one-day meeting, Mr Yanukovich, who took office last February, brushed aside the chief concern of his hosts – that the country was backsliding on its commitment to democratic reform. In particular, he dismissed criticism by the US and EU of last month’s regional elections. The EU, eager to draw Ukraine closer to the west, offered one concession on Monday: a commitment to set out conditions for the country to achieve a visa-free travel agreement with the bloc – something sought by Mr Yanukovich. But no timetable was given.
(Updating to reflect change in Timis shareholding and rig contracts detail)
It looks like the end is nigh for Regal Petroleum, the exploration company that launched the career of entrepreneur, businessman and charity worker Frank Timis. Read more
Ukraine, one of the world’s largest grain producers, is set to impose quotas on its grain exports in order to protect national food supply after poor weather damaged crops, reports the FT. The move comes after Russia banned grain exports two weeks ago, driving up prices of staples such as wheat and barley and raising fears of a repeat of the 2007-08 food crisis when countries imposed trade restrictions. Ukrainian officials said the government would decide on the final quota levels on Wednesday after discussions with grain traders.
Ukraine, one of the world’s largest grain producers, is set to impose quotas on its exports in order to protect national food supply after poor weather damaged crops, government officials said on Tuesday, according to the FT. The move comes after Russia banned grain exports two weeks ago, causing prices of staples such as wheat and barley to spike and raising fears of a repeat of the 2007-08 food crisis when countries from India to Argentina imposed trade restrictions.
Ukraine received a big boost from the IMF when the organisation agreed to grant the country $14.9bn to stabilise its recession-battered economy, the FT says. But final approval of the aid package hinges onthe government’s willingness to press ahead with unpopular economic reforms, some of which have to be adopted before the IMF board meets this month. Separately, the FT reports that the IMF has written off $10.8bn of the Democratic Republic of Congo’s debt, after a record seven years of negotiations.
Russia and gas disputes go hand-in-hand.
And the latest dispute of this nature is focused on Belarus. Read more
It was a record-breaking day in the sovereign CDS market, though not for reasons that any government would welcome. Spreads blew out on a day of unprecedented volatility. Greece was was at the epicentre, its five-year spreads trading as wide as 650bp late in the session, 165bp wider than yesterday’s close. Its one-year spreads, always quite illiquid, were being quoted at 800/1200bp. Greece has now captured the unenviable title of the widest sovereign credit in Europe, taking the mantle from the previous holder Ukraine (a single B credit trading at 560bp).
Russia on Wednesday agreed to cut the price of its huge natural gas supplies to Ukraine in exchange for a 25-year extension of the lease of its Black Sea fleet on Ukraine’s Crimean peninsula, Reuters reported. Ukrainian President Viktor Yanukovich, who said the gas agreement was “unprecedented in the history of our relations”, said Ukraine would undertake to import 30 billion cubic metres of gas in 2010, to rise to 40 billion in 2011.
News came to us on Wednesday, via the Daily Mail (yes, sorry), of an interesting twist in the saga of Ukrainian reform.
According to the report, the country’s new prime minister, Mykola Azarov, made a strategic decision when appointed to form an all-male cabinet because, as the quote dating back to March 19 went:
‘conducting reform is not women’s business’ Read more
Viktor Yanukovich, Ukraine’s new president will try to win lower natural gas prices from Russia on Tuesday, with an offer to relinquish control of the strategic natural gas pipeline which pumps 80 per cent of Russian natural gas supplies to Europe, the FT said. Yuriy Boyko, energy minister, and Yevhen Bakulin, the new head of Naftogaz, Ukraine’s state energy company, are to hold talks in Moscow.
Here’s a telling factoid from BNP Paribas’ Emerging Markets team on the state of global risk appetite.
A Ukrainian local debt auction on Tuesday attracted what the analysts described as “spectacular and unprecedented demand from international investors”. Read more
Here’s a small sample of what the world’s central banks are doing with their newly inflated SDR reserves.
Mexico, via Bloomberg: Read more