USD/RUB Trading forecasts and signals

      Shares 29.08.2022 - 4.09.2022Dividends for the week of 08.29.2022 - 09.4.2022CompanyPricePaymentAnnual dividendCutoff DateLast dayMcDonald's (MCD)$256,95$1,382,15%01.0930.08Kellogg Company (K)$73,85$0,593,20%01.0930.08Realty Income (O)$69,91$0,24754,25%01.0930.08Pepsico (PEP)$175,04$1,152,63%02.0931.08Bank Of America (BAC)$34,03$0,222,59%02.0931.08Suncor Energy (SU)$34,31$0,475,48%02.0931.08Nike (NKE)$108,28$0,3051,13%06.0901.09Pioneer Natural Resources (PXD)$257,38$8,5713,32%06.0901.09 Corporate reporting season 29.08.2022 - 4.09.202229.08Heico (HEI), Catalent (CTLT)H World Group (HTHT), Joyy (YY)30.08HP (HPQ), Hewlett Packard Enterprise (HPE), Crowdstrike Holdings (CRWD),Best Buy Co. (BBY), Chewy (CHWY), Chargepoint Hldgs (CHPT), PVH (PVH)Baidu (BIDU)31.08Brown-Forman (BF.A, BF.B), Veeva Systems (VEEV), Mongodb (MDB),Okta (OKTA), Cooper Companies (COO), Pure Storage (PSTG), Sentinelone (S), Donaldson Company (DCI), Nutanix (NTNX), Greif (GEF)01.09Broadcom (AVGO), Lululemon Athletica (LULU), Hormel Foods (HRL),Campbell Soup (CPB), Toro Company (TTC), Ciena (CIEN), Smartsheet (SMAR),Science Applications (SAIC), Ollie's Outlet (OLLI), Signet Jewelers (SIG)Weibo (WB), Hello Group (MOMO) Macroeconomics and major events 29.08.2022 - 4.09.202230.08GermanyGermany Consumer Price Index (CPI) (MoM) (Aug) USCB Consumer Confidence (Aug)JOLTS Job Openings (July)31.08RussiaWeekly inflationChinaPMIs (Aug)GermanyGermany Unemployment Change (Aug)EUConsumer price index (CPI) (YoY) (Aug) USADP nonfarm payrolls (June)Crude oil stocks01.09ChinaManufacturing PMI from Caixin (Aug)GermanyManufacturing activity index (PMI) (Aug)USInitial jobless claimsISM Manufacturing PMI (Aug)02.09USNon-farm payroll change (Aug)Rate of unemployment ...

The United States has not renewed the license allowing American individuals to receive payments on Russian Eurobonds. And after that, everyone again - for what time already - started talking about a possible default of Russia. The White House is almost certain that she will default - however, this will not affect the global economy in any way.But is it possible to somehow still do without default?We'll pay in rubles - and that's itRussian Finance Minister Anton Siluanov sees an easy way to solve the problem: he declares that Russia will pay in rubles. And for foreigners - to accounts of type "C".True, in the previous few months he had stated the same thing, but in fact they still paid in dollars so as not to violate the terms of the issues.Yesterday Siluanov also hinted that alternative instruments are being worked out to allow bondholders to get their money.Alternative payment options for the state debt of RussiaA lot depends on the conditions of a particular release. For example, part of the issues does give Russia the right to make a payment in rubles.There are also more elegant ways out of the situation. For example, Russia will make favorable buyout offers to bondholders. Or the payment on the bonds will be made instead of the Russian Federation by some third, "non-sanctioned" country.Website RBC also allows Russia to use the "Currency Indemnity" clause in its favor, which is present in all issue prospectuses.Payment in rubles will not violate the conditions?What will happen if Russia pays bondholders in a currency other than the dollar? According to this paragraph, according to RBC, "the payment obligation will be considered fulfilled if the investor can exchange the amount of other currency received for dollars in the amount due on the nearest possible day. If, during the conversion, the amount in dollars is less than the amount due, the Russian Federation is obliged to reimburse this shortfall to the holder, as well as compensate him for all transaction costs."However, if you read this paragraph more carefully, you can see that it refers mainly to determining the currency of compensation for all kinds of losses and costs, and not coupon payments at all.Most issues are denominated in dollars or euros. Some issues have an option for an "alternative payment currency". But the "Currency Indemnity" clause defines, rather, the fact that the currency of compensation for any costs and losses of bondholders can only be the US dollar.Even if we assume that Russia decides to use this item, new problems are not excluded. After all, the ruble is not a freely convertible currency now due to restrictions on the withdrawal of capital abroad. Therefore, attempts by Americans to exchange rubles for dollars and take them abroad will clearly cause them discontent and costs. It is precisely these that the issuer will have to reimburse in dollars.And this is not to mention the fact that it is not enough to look at just one item of the issue prospectus to understand whether payments in rubles are acceptable or not. There is also, for example, the item "Provisions on collective actions" ("Collective Action Clauses"). Its essence is simple: any change in the key parameters of the issue (including the issue currency and payment terms) can be carried out only with the consent of the majority of bondholders.There is also a "Reserved Actions" clause, which defines a list of actions that the issuer cannot take without the approval of the majority of bondholders. There is, of course, a change in the currency of the debt and the currency of payment.  So it's not that simple. In order to avoid default with a guarantee, it would be easiest for Russia to find dollars again somewhere.All other options may be controversial and cause a lot of ...

No, this is not a dream: the ruble on Friday felt the 57 per dollar that had long since sunk into oblivion...Some hotheads, not fully understanding the essence of economic processes, entered the race to see who would give the forecast of the highest ruble exchange rate. Sberbank predicts 50, Loco-Invest - 40, somewhere else I heard 26, and very far from the economy they call the rate 1/1. No, of course you can close the market and hang such a sign as in the USSR, then a black market will arise.So, why can I say with a high degree of confidence that the lira's exchange rate against the dollar and the euro will collapse when the Turkish budget runs out of money to support it under the deposit protection programs introduced in December. Because Turkey has 70% inflation, and the USA and Europe are below 10% (PPP theory). Inflation as a basic characteristic of the economy is always primary before the exchange rate, because the task of the exchange rate is to balance foreign trade and capital flows. If this balancing does not occur, foreign trade stops. If an artificial element is introduced into this process in the form of capital controls, including interventions through shell banks and deposit protection programs, a temporary deviation may occur.The same is true with the ruble, but in Russia inflation is not the main factor now, and there is no such sharp difference with the issuing countries of euros and dollars.For Russia, the main parameters of the economy now, due to changes in logistics, sanctions and other temporary difficulties, have become export and import flows. The excess of exports on imports since the beginning of the year is three times higher than it was three years ago. This means that since the beginning of the year, exporters have been selling more currency than importers buy it, three times more, or about $90 billion. This canopy raised the ruble exchange rate — artificially, and not on the market, as Mr. Oreshkin claims. It is difficult for me to call a market a market where only exporters and importers are present. In the usual understanding, capital flows form the market, they always drive the course; that is why macroeconomic news causes such a reaction to Forex. Until February 24, the exchange rate was market-based, because foreigners from, as they say now, "unfriendly countries" could sell the currency. Now neither they nor other categories of players can do it.If foreigners were given the opportunity to sell Russian assets now and then sell the ruble for the euro and the dollar, the exchange rate would soar to 200, 300, 500 and so on - it depends on the subtlety of the market at one time or another and various kinds of flash crashes. But it is also true that if the gold reserves had not been frozen, the exchange rate due to the sale of 200-300 billion dollars would have fallen to 120-150. That is why the export-import market, which does not exist in any country without restrictions on the movement of capital, is not a market, but an artificial exchange rate. This explains the paradox of the ruble's growth by 100% from the minimum in the conditions of the upcoming recession and high inflation.But even in such an artificial market, trees do not grow to the skies. Why? There are two big reasons. The first is the marginal costs of the exporter, the second is sanctions + time lag = reduction of export flows.As for the first one, let's say the ruble exchange rate will strengthen to 40 per dollar. Perhaps it is here that producers of oil, gas, metals, fertilizers and agricultural products will not be able to reach the cost price level. And this means that the supply of goods from their side will begin to decrease. The surplus of the foreign trade balance will begin to decrease. There will be movement on the importer's side as well. For him, the prospect of profit will be so tempting that imports will start to grow sharply. The positive balance will turn into a negative one, and the ruble exchange rate will begin to decline.The second is sanctions. Gazprom has stopped gas supplies to Poland, Bulgaria and Finland. The EU threatens to reduce purchases of Russian gas in the future. The oil embargo has been imposed in the form of self-sanctions; Russian oil exports are declining. It takes time to reorient these flows (which have increased in value terms after the rise in world prices) to other markets, and it is not completely clear whether all exports will find new buyers, who are now increasingly demanding a discount. Therefore, in the very next few months, export revenues will decrease. That is why at the end of the year, many banks have the ruble exchange rate much lower in forecasts than it is now.As you know, there is no smoke without fire, and even more so if the authoritative Vedomosti writes about it. Exporters seem to be so bad now and so sorry to give them currency for a song that it seems the Central Bank has started buying it with fake banks. They began to write about their pain and suffering below 80 rubles. The regulator cannot buy currency for itself now. He was deprived of the right to regulate the dollar and euro exchange rate by currency interventions. If he buys them, this currency is reflected in the accounts of the issuers - the ECB and the Fed and it will be immediately seized. But some shell banks, for which there is less risk of sanctions, can temporarily buy something. On the other hand, for some reason the authorities do not want to reduce the threshold of 80% of the sale of mandatory revenue. Probably, they are afraid that exporters will leave everything abroad, which sooner or later may also be arrested. But gradually the weakening of all currency restrictions shows us how the Central Bank does not like such a high ruble exchange rate, even though such a rate helps to fight inflation and declare victory in the sanctions war with the West.On Friday, as it turned out, there was not a reverse, but perhaps a fixation before the weekend. And, it is possible that this veiled intervention of the Central Bank to weaken the ruble took place after all. Now there is a tax period, and if the ruble manages to be deployed in the coming days, it will fall very much in early ...

The ruble ended last week with a weakening after four weeks of active growth.The dollar exchange rate increased by 5.2% over the week, to 80.00 rubles / $, which is almost four rubles higher than the closing level of the previous week.Pressure on the Russian currency was exerted by the decision of the Bank of Russia to ease a number of restrictions on the purchase and withdrawal of currency, introduced on March 9. The Central Bank canceled the commission of 12% for the purchase of currency on the stock exchange.In the coming week, the weakening of the ruble may contribute to the Central Bank's permission for banks to sell cash currency from April 18, which has been received at the cash desks since April 9, Promsvyazbank notes. The excess supply of dollars in the foreign exchange market continues to act as support due to limited imports into the country.The tax period is ahead: about 2.2 trillion rubles will be required to pay VAT, mineral extraction tax and income tax by the end of April. In the absence of foreign policy pressure, the ruble is likely to remain near the current values, Zenit Bank suggests.The balance of factors is formed in such a way that even with the further weakening of currency control measures, the Russian currency is unlikely to sink much below current levels in the near future, the BCS believes.It seems logical to mitigate the requirements for the mandatory sale of foreign exchange earnings, since further strengthening of the ruble is not in the interests of fiscal policy. The dollar exchange rate above the level of 80 rubles/ $ is more comfortable for the budget, the Russian Standard bank notes.The dynamics of the ruble in the future will be entirely determined by exports and the rigidity of restrictive measures of the Central Bank of the Russian Federation, Raiffeisenbank believes.Sberbank expects that the ruble may strengthen to 75 per dollar on the horizon before the end of April. The Central Bank of the Russian Federation is unlikely to rush to mitigate the requirement for the mandatory sale of foreign exchange ...

On April 11, one of the market participants sent a request to the CDS Committee with a request to consider the situation with Russian Eurobonds. We are talking about the issues of Russia-2022 and Russia-2042, for which the Ministry of Finance of the Russian Federation could not make a payment in dollars and transferred the amounts in rubles to special accounts of type "C", according to the Presidential Decree.Nevertheless, if you focus on the issue prospectuses, the payment in rubles is still a default. So far, however, technical: until May 4, Russia has time to pay in dollars.For reference:CDS - "insurance" against default. The CDS seller reimburses the buyers for losses related to the issuer's default. But before the payments are made, the CDS Committee - Credit Derivatives Determinations Committee — must confirm that the "Default Event" has occurred.Who will make the decision?A full list of all current members of the committee can be found here. Among them are the giants of the derivatives market:Bank of America;Barclays;BNP Paribas;Citibank;Credit Suisse;Deutsche Bank;Goldman Sachs;JPMorgan Chase;Mizuho.The Committee also includes the largest vulture fund Elliott Management Corporation.As a result, the Committee must decide whether the fact of default has occurred or not. If yes, you will have to pay for CDS in Russia.Who will pay for the insurance?According to Bloomberg, PIMCO funds sold the most CDS - almost $1 billion. All this is according to open data at the end of 2021. Pimco itself refrained from commenting. By the way, she, represented by Pacific Investment Management Co., LLC, is also a member of the CDS Committee.Investment Management Company Pimco is an investment holding company with many funds with a total asset value of about $2.2 trillion under management. Former Fed Chairman Alan Greenspan worked for the company at one time.  In 2000, Invest Holding was acquired by the German insurance concern Allianz. Bloomberg has previously written that Allianz, BlackRock and Vanguard Group are the largest foreign holders of Russian sovereign debt.  Allianz is one of the oldest companies in Europe, founded in 1890 in Berlin. For many years of its existence, it has managed to "shine" in many historical events — from the payment of compensation to the victims of the Titanic to the insurance of buildings and personnel of the Auschwitz and Dachau concentration camps.  By the way, the default that Russia is now predicting may be just the beginning of an epic. If this happens, sellers of so-called CDS may come on the scene.Now the cost of CDS for Russia is off the scale and reflects the following expectations:71% - probability of default within 1 year;81% - probability of default within 5 years.Who sells CDS?This is an over-the-counter instrument. There are not so many sellers of "insurance" against defaults, mainly large international banks.Which Russian bonds are covered by CDS?They only protect against Russia's default on foreign currency bonds and do not apply to ruble-denominated government bonds.  Can sellers of "insurance" waive their obligations?They were close to it once, when the question of Greece's default arose. Then ISDA, the International Swaps and Derivatives Association, pretty much "rubbed the nerves" of bondholders, while doubting whether to recognize the case with Greece as a default or not. But in order not to undermine the credibility of CDS as a tool, I still had to make payments.Currently, a request has been sent to the CDS committee, but the date of the meeting has not yet been set. We are waiting for ...

The Moscow Stock Exchange has been closed for almost two weeks. The stock exchange assets of investors are practically frozen, the owners of shares have suffered especially - they cannot buy or sell their securities. It is a little easier for bondholders – they at least count on coupons, execution of offers and repayments, although adjusted for significantly increased credit risks.When will the exchange open? "It's a matter of weeks rather than days," a major market participant said after communicating with the Central Bank, the Ministry of Finance and the stock Exchange. And perhaps this is also an optimistic view of things. Let's try to understand the situation.The beginning of the special operation of the Russian Federation in Ukraine brought down the stock market by tens of percent, which led to the termination of trading on March 1. Since then, the geopolitical situation has continued to escalate. Opening trades in such conditions would lead to a new sharp drop in the market and the highest volatility at low levels. Many investors will try to dump securities at any quotes, cursing the stock market and fixing huge losses. Fans of "catching falling knives" (purchases during a sharp drop in quotations) will try to pick up cheaper securities, but it is unlikely to bring them happiness – the long-term prospects of the Russian economy now look extremely uncertain. The only public able to catch profits in the muddy water from the market fall are speculators with a high tolerance for risk.Here are some suggestions why the exchange is not opening.First - the reaction of millions of private investors may be very sharpFor several years, their savings have been actively involved in the investment sphere, but now people will have to realize the depth of the expression "There are more important things than the stock market" and many will leave the market altogether (if there is anything). A further increase in social tension is definitely not included in the plans of the Russian authorities - not out of humanity (a strange word these days), but at least out of elementary caution. Therefore, the exchange platform is likely to remain closed until the onset of at least some kind of geopolitical detente.The second is the actions of foreignersForeign investors can act not only as panic sellers, further increasing pressure on the market. Among them, there will certainly be risky players (for example, from countries that are not "unfriendly") who are ready to buy shares in Russian companies at a bargain price. It is quite possible that the Russian authorities are developing practical mechanisms to neutralize foreign sellers of assets and to regulate the actions of foreign buyers - until such mechanisms are created, the launch of the auction will be postponed.The third and probably the most important thing is what to do with repo transactions?Recall that "repo" transactions (repurchasing agreement) are short-term loans secured by securities. The peculiarity of these transactions is that when the quotations of a stock or a bond that is a pledge decrease, the borrower is obliged to make additional collateral, otherwise the securities are subject to sale. The opening of exchange trades with a catastrophic drop in quotations will cause large-scale losses of banks and investment companies - it is their "repo" transactions that account for a significant share of exchange turnover.In the most severe scenario, losses may also affect private investors, since their securities can be used by their brokers in repo operations (the investor must give prior consent to this, in return he usually receives preferential terms of service). Apparently, regulators and major market participants are now looking for ways to resolve the losses that arise, and the trillion rubles promised by the government of the Russian Federation from the National Welfare Fund is intended to solve this problem. True, some experts believe that more significant amounts are needed to settle losses, someone even calls the figure 10 trillion rubles, which is comparable to the size of the entire NWF (13.6 trillion rubles as of 01.02.2022).It is possible that even with the favorable development of the geopolitical situation, the market will open in parts.What will happen after the exchange opens?There are a lot of reasons not to open the market right now - panic of asset owners, REPO transactions and actions of non-residents. There are also many reasons to open the market urgently - the funds of millions of Russians turned out to be absolutely illiquid. But many could be planning to sell or buy new assets.The exchange can be opened at any time. The question is different. What market movement will we see with the opening? If it exceeds the acceptable thresholds, then with the opening of the exchange we will see its closure as well.Thus, we suggest that investors focus not on the ”opening date" of the market, but on the actions that should be performed with the opening of the market.Specifically to analyze the financial situation of companies, stocks and bonds, we have launched a series of "Investment Committees" on the IF+ platform. Our analysts clearly and consistently analyze the prospects of companies in the current situation, looking for outsiders and the most promising players in the ...

The ruble sank significantly on Wednesday amid Joe Biden's negative comments about Vladimir Putin. According to the American president, his Russian counterpart should soon face the consequences of attempts to interfere in the 2020 elections. The fact is that US intelligence recently published a report that pointed to possible attempts by Putin to influence the results of the recent presidential election.The main question at the moment is how tough will the new sanctions be? Apparently, market participants still do not believe in really serious restrictions, such as a ban on the purchase of government bonds or disconnecting the country from SWIFT. However, the yield of government bonds still increased and is at the highest level since April last year – 6.87%.Additional pressure on the debt market is exerted by the growth in the yield of treasuries and expectations regarding the tightening of the DCT by the Russian central Bank. Tomorrow, the Central Bank will hold a meeting, where the regulator will consider the possibility of increasing the key rate. Most likely, no changes will occur, but investors hope to get hints on the actions of the regulator in the foreseeable future.Meanwhile, Jerome Powell was able to inspire market participants with optimism: the Fed rate was left at the same level, and the agency will continue to pump the market with liquidity, despite the unwinding of inflation in the United States. In addition, positive forecasts for the recovery of American GDP were announced: by the end of 2021, growth should be 6.5%.Do not forget about the incentives. Very soon, Americans will start receiving money from the government, most of which will almost immediately be transferred to brokerage ...