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Russian Central Bank Intervention Is Losing Its Mojo, Bond Yields Crash Over 12%
The Bank of Russia this week made its heaviest currency intervention in more than a month, according to WSJ, to try to stem the escalating trend of Ruble collapse... but it's not working. Chatter of three significant interventions this week (which are quite apparent in the USDRUB chart) have had less and less positive impact on the currency and even with warnings of jail for FX speculators, the post-intervention selling continues. It appears, however, that the main pressure today is in the Russian bond market as 10Y RUB Bonds cracked 80bps higher to 12.04% yield... the pressure mounts on Putin.
Central bank data showed Friday that it spent $1.9 billion to ease downward pressure on the ruble on Wednesday after selling $700 million on Monday.
The central bank eliminated regular interventions and let the ruble float freely in early November after the nearly $30 billion it spent from reserves failed to stop the ruble’s rapid depreciation in October. Despite the free-float policy, the central bank said it retains the right to intervene suddenly and at any level if it deems the country’s financial stability is threatened by the ruble rate.
On Thursday, President Vladimir Putin asked the central bank to save the ruble from falling. The central bank later warned it may open an investigation into the possible manipulation of the ruble, which has lost some 40% of its value against the dollar due to massive capital flight, sliding oil prices and Western sanctions.
Interventions having less and less impact...
as The Ruble tracks the price of oil almost perfectly off the highs...
One wonders if FX speculation warnings pushed speculators into the bond market....
Charts: Bloomberg
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Hard to imagine Putin is going to risk his job, life, friends and a Depression in Russia for the junk that is Ukraine. Country is indebted, destroyed, destitute and half the inhabitants will fight for decades against a Russian takeover...time to walk away.
It's about the pipelines and infrastructure.
The guy who owned Yokus that just got out wants his money back!
Ukraine in 2014 is what Afghanistan was in the 1980's - an attempt to give 'Russia its own Vietnam Mk II'
Bond Yields Crash
Interesting, albeit retarded way of putting it.
Vlad needs to single out the real problem with the ruble - it's those damn currency speculators!
Watching cash flow is most important.
Russia will most likely become a Lada granta
economy.
To preserve the stock of money ( as in Ireland) by stopping the flow is not very nice for the young or local business owners.
Given Russia's huge oil surplus this is best as it does not need fancy French style capitaL heavy investments.
Expect Russian domestic oil use to continue to expand as Lara grant as penetrate into each household.
Not good for German corporates.
Should have bought a merc last spring.........
When the inevitable happens and Vlad devalues the ruble, finally the Russian people will understand that their poverty is a gift from their president.
Can anyone really blame them for wanting to save in dollars or euro?
We can print dollars faster than they can save them
After grains of sand on the shores and stars in the skies, the world's first product to reach a metric of a quadrillion will be the USD.
I notice that the pro-Putin teenagers over on the Ukraine thread don't seem to be swarming in this particular comments section... it's eery how from one thread to the next, the ZH commenters seem to be cloistering themselves in oppositely-poled echo chambers. On the Ukraine minister thread, everyone is stalwartly pro-Putin.
Strange...
stopthejunk1
Your junk is flawed, dude. You probably hear that a lot at the cougar pick up bars you frequent.
Because of the sanctions, Russian imports are practically non-existent and there's nothing spend rubles on there, as are exports, except if the West NEEDS them, and then the exporters raise their prices ifthey are denominated in RUB.
Contracts for gas I imagine are in USD, but I'll acquiesce to your superior knowledge on that. They are being paid with a moar valuable $.
The Russian people may be hurting some, but this is the nation that defeated Hitler at Stalingrad and burned down Moscow to beat Napoleon. They have credentials, dude. Bona Fides.
They don't just fight piss ant Granadas a zillion times smaller than they are.
In late '07 oil began its journey from $90 to $145 to $38 a year later. That didn't bother the world, and then we didn't know the extent of the manipulation in every market.
You don't think Russia can ride out low oil prices for a year? With China sitting on $2 trillion US -- and prolly slowly reducing its dollar position now with the USD flying, without unsettling the market -- until the ruble is 'sold'out'.
We could have a draw play then. Like when you went short FaceBook at $19 several weeks after its IPO. This could be the Russian version of that criminal maneuver.
As the BRICS have already announced that they will trade with Russia in rubles, perhaps they are waiting for the US to drive it down low enough, buy plenty and take delivery. China alone could dump several hundred billion USD into rubles, but they would probably do that after the other BRICS had loaded up.
So that's why my fellow pro-Putin teenagers are silent. They don't want to tip off the Fed and the other Central banks about the hosing they are about to get.
Oh, wait a minute...
Of course Putin regime will collapse (I predict as idiotic Putin regime is - probably will arrest people in the way, like saying their speculators that hurted RUB, etc than will ban holding USD, and other nutty job) - question is how much damage it will cause to the world.
Russia is not Libya and Iraq. 82% of people support Putin. There is not a ride cookies from Nulland !!! Sorry for my english
No need to apologize for english. That viedoklis_lv guy is troll paid by Kiev Yatzi Junta. He earns daily one potato.
In his Latvian SSR, one potato makes him rich.
ve are used to your kind english :o)
82%? My ass, gee who could imagine a dictator fudging polls? We americans never saw it until Obumbles... BTW I wager that Vlad is going nowhere, a war would make that easy for him.
No, it's not propagnda, it really such a rating. People are ready for it to break
(jaw hanging open)
You're rather precocious for a child born in 2009.
But he doesn't know who their speculators are, maybe over there.
Watching out, Latvian lad
Putin are backing RUB with many potato. Shorts are squeezing.
You will have struggle.
Sound like mix mashed potato for viedorklis honeydipper troll from Latvian SSR.
He having nightmares soon
Get on your meds quickly wishful thinker .
Watching Russia implode is the best holiday gift!
hahahaha. This is your show on CNN, here everything is good
The ruble is tracking the price of oil. Oil is near a bottom, and will rebound after marginal supply is taken out.
No problem for Russia.
Back the ruble in Gold and it will turn around.... Print more FIAT is going FULL RETARD !
PUTIN is just another PUPPET OF CENTRAL BANKS !
The Vampire Squid would just take all the gold, then lever it 100:1.
I'm surprised the Russian Shills haven't flagged me down ... hah, cause you know i'm right
He only has to back the ruble in gold and this will finally go to the big leagues ... but .. stay with fiat and the country will go in the toilet of the bankers !!!!!
do it
Do it
DO IT Putin and show us your not afraid of your shadow
Dare I ask?
In Hamm Jammistan, whose currency is backed by the Midas Metal, how does it work? If I have a thousand HJ Pengos or a thousand HJPengo gold certificates, do I just appear at the Central bank of Hamm Jammistan, during regular business hours, go to the redemption window and receive a thousand Pengos worth of the Hamm Jammistan Golden Horde?
I would be honored to be enlightened by yourself, so if Putin ever calls me -- I have sent him several bromantic notes -- I'll know what to tell him.
Thank you for your kind consideration. Etc, etc.
America's position as owner of the world reserve currency gives it powers no mortal nation has. Right now Washington is using evey bit of Dollar Power it has to strangle Russia. I don't understand world scale finance or FX very well at all. Who does! All I hope is that Russia has a come back plan, something to outlast this currency attack.
Anyways, as the Russian currency sinks, all EU imports to Russia will pretty much end! Consumer and food producers in the EU will lose billions in profits. In Europe, losing a 150 million person consumer market is a painful thing. Russian oil and gas comes to them in the World Reserve currency, so they lose nothing in the FX change. 1 dollar buys many more Rubles. It is falling Oil Price that hurts.
From a Russian point of view, they might just as well declare that the nation is now at war. They will need to act with war powers to confront the assault by the west, both economic and military. Ukraine is a proxy attack on Russia, and the economic sanctions imposed on them has been equal to war in past such cases. So really, the Russian government might as well declare a national war emergency, as that is just what this is.
At least Putin was smart enough is his last speech to address the bad business climate in Russia. He called for new tax laws for business and also for more protection of business from the criminal and corrupt local governmets. Outside Moscow, running a business or starting one requires dealing with corrupt local government and local organized crime. The biggest short coming in Russia is this dual criminal element seeking to leech off of honest business enterprise. I call it Russia's Number One biggest problem. Were I Putin, I would unleash the military and security police in a full scale offensive on this criminal and fraud laced system in loacl regions. It really is worse than you know. I met some of this on my last two trips inside Russia, any business person there will tell you in secret what they undergo to operate. Historically this has ALWAYS been the greatest weakness of Russia, corruption is like the air they must breath.
Vlad, it's the Vampire Squid. Resistance is futile.
Russia is "investigating" why the Ruble is dropping? All they need to do it look in the mirror. Lemme guess... they will decide it is a combination of "speculators" and "foreign intervention." And the stupid Russian populace will eat it up like crazy.
Everyone understands that it is closed from the capital market and high debt in the currency of our companies.There are not as stupid as you think. But Russia is not a country that can crush sanctions.
Russia should perhaps impose some kind of temporary capital/exchange controls in order to curb capital flight. Countries in western Europe still had capital controls in the 1980s (Sweden up to 1989). Putin himself recently told RT.com that Russia is the only emerging economy which has no capital controls.
In addition to that I suspect that Russia should do this (I have posted these viewpoints quite recently):
1. Let the Russian central bank print money and then lend the money to the Russian government or a pension fund controlled by the government. The interest rate should be 0 % or near 0 %. Then let the government or the pension fund buy Russian stock at fire sale prices. This solution would resemble how the Federal Reserve is propping up the American stock market by printing money for the primary dealers. I also think that it should be a better idea to print money in order to prop up the stock market if the stock market is undervalued, like in Russia.
2. Attract dumb money from the west. Ask the Chinese to create mutual funds based in Hong Kong that buy Russian stock. If the Russians and Chinese sign a non-confiscation of assets treaty, Western retail investors won´t be afraid to invest in these mutual funds.
This got to be less risky for Russia than attracting smart money and oligarch money. Smart money sometimes have political agenda. Smart money is also more simple to influence by those who have a political agenda.
All this being said.... I am looking closely at Russian stocks. If ever there was "blood in the streets" to invest now it that time. Stocks down 40%, the Ruble down 40%, they are at war, personal freedom is dropping, sactions, etc. Do you know that right now the entire Russian stock market trades at 4x earnings? Thats loopy! Apple's market cap is larger than all Russian stocks combined. Once the Ruble levels out, I am gonna buy. Stocks this cheap come alone once or twice a decade. One just has to overcome all the fear that says to run for the hills. No one makes money buying stocks when they are loved. Gazprom and Lukoil at a PE of 3? Sign me up.
The people Putin is playing chess against are buying his bonds.
MATE.
I don't understand why countries still try to "defend" their currencies in the FX market. It never works and always ends up with the currency lower and the nation's FX reserves spent.