18 January 2021 by jbchevrel
While the recent rally in energy prices and metals bodes well for Russia’s current account dynamics in 2021, geopolitics reasserted itself as a bearish factor today. Russia 5y CDS widened by +2.5bp on the day to 92.5bp [while comparable South Africa and Saudi 5y CDS were unchanged]. The curve steepened by that amount. Adding to that, the RUB lost more than half a percent vs USD. This is as some focus built up on the come-back of the controversial Putin opponent named Alexei Navalny into Russia today. A Russian court [set up at a local police station in the suburbs of Moscow] ordered the so-called ‘opposition leader’ Navalny jailed for 30 days, despite verbal efforts by US/UK/Europe politicians to free him. Navalny faces 3.5 years [maximum] in prison on charges he breached the terms of a suspended sentence. The European voices including Mrs Von der Leyen’s had the market give some probability to additional sanctions on Russia, as Russian officials including Minister Lavrov made it clear that Navalny had broken Russian law and could not just be freed. Later this month, the fate of Navalny in his trial, may indeed add more risk premium into instruments reflecting Russian risk. Elsewhere, it was a quiet session, with the US out on Martin Luther King day.