20 October 2020 by jbchevrel
Russia CDS has been successful in remaining below the 100bp handle despite the recent market softness. Today Russia CDS closed at 93bp. For reference, on March 18th, it closed at 305bp. Crude benchmark prices remaining higher than $40/bbl is one part of the equation. The market weighs that OPEC+ would likely intervene further in this market, should it be unbalanced again. Second positive, Russia and US are about to close the one-year extensions on arms-control deal that would freeze the number of nuclear warheads for each. The remaining issues to be worked out include verification of the warhead freeze and the definition of a warhead. On the negative side, the US State Department has broadened its sanctions against Nord Stream 2 (Russian natural gas pipeline to Europe). The most likely next US President, VP Biden, is also widely regarded as hawkish as far as relations with Russia are concerned. On Friday, we will have the Central Bank of Russia rate decision (1130 LDN). The committee is not expected to cut the Key Rate further down, from its current 4.25%, but if it did, that would push real rates closer to zero (if not through it) and would probably be perceived negatively by the Russia CDS and the Russian rouble.