1/ The “Fortress Russia” strategy has reduced macroeconomic vulnerabilities. Investors are referring to it as “safe heaven” among #EmergingMarkets What can go wrong? #sanctions and lowest popularity since 2013. Economy reopening as infection spreads and stimulus is modest. 
2/ Russian assets are performing strongly compared to peers. Inflows into local markets have returned. Foreign ownership of OFZ has stabilized at near 30% with recent auctions more than 40% bought by foreigners. External debt is scarce.
3/ The Bank of Russia is not keen on QE. It will provide long term repos (1m & 1y) floating rate at 7d repo (policy rate) auctions coming end-May and early June. Why Russia is so conservative on QE? Because banks still have liquidity and hold 4% of their assets in OFZ.
4/ We expect the overall deficit to be 5-6% percent. The authorities themselves have already announced some 2.8% in support and more is likely. The full deficit can be financed from the NWF (9% of GDP), but likely authorities will balance with OFZ issuance.
5/ Ruble is stabilizing and FX interventions are beginning to subside. Total interventions were much less than in the past as Ruble is freely floating. These are fiscal rule interventions.
6/ More here @IIF with @BHilgenstockIIF
iif.com/Publications/I…
And our research in front of the paywall now.
iif.com/Research
iif.com/Publications/I…
And our research in front of the paywall now.
iif.com/Research
