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10 Feb 2015
Russia might see a gradual easing to around 10% level by 2015 – TDS
FXStreet (Barcelona) - The Research Team at TD Securities note that expectations are strong for a gradual easing to around 10% level by the CBR in this year, which might lead to an increase in risks towards a significan RUB depreciation.
Key Quotes
“Our bearish opinion on Russia has been broadly confirmed. The government has enough resources to repay external debt coming due over 12-18 months, however the market attitude could sour in 2016 when reserves fall below $200bn, which remains the long-term risk.”
“Over the near-term, while government reserves remain adequate, there will continue to be banking sector consolidation and absorption of more of the corporate sector back into state-owned enterprises in order to meet funding needs.”
“The CBRs recent decision to cut took everyone we spoke with by surprise, and while most thought CBR credibility was partly damaged, most also thought this represents a change in tack for policy.”
“The local consensus is now for sustained, gradual easing to around a 10% level this year, in keeping with the expected moderation in inflation and a de facto targeting of real rates.”
“We remain concerned that this is a very risky gamble on the part of the CBR and increases the skew of risks towards significant RUB depreciation even if, for now, it remains on track for gradual appreciation."
“For these reasons, we believe that the risk-reward structure of trades involving Russian assets remains unattractive, even more so in light of the risk that the current CBR strategy could fail.”
Key Quotes
“Our bearish opinion on Russia has been broadly confirmed. The government has enough resources to repay external debt coming due over 12-18 months, however the market attitude could sour in 2016 when reserves fall below $200bn, which remains the long-term risk.”
“Over the near-term, while government reserves remain adequate, there will continue to be banking sector consolidation and absorption of more of the corporate sector back into state-owned enterprises in order to meet funding needs.”
“The CBRs recent decision to cut took everyone we spoke with by surprise, and while most thought CBR credibility was partly damaged, most also thought this represents a change in tack for policy.”
“The local consensus is now for sustained, gradual easing to around a 10% level this year, in keeping with the expected moderation in inflation and a de facto targeting of real rates.”
“We remain concerned that this is a very risky gamble on the part of the CBR and increases the skew of risks towards significant RUB depreciation even if, for now, it remains on track for gradual appreciation."
“For these reasons, we believe that the risk-reward structure of trades involving Russian assets remains unattractive, even more so in light of the risk that the current CBR strategy could fail.”