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Cold War Headlines Unfreeze Russia CDS

08 August 2018 by jbchevrel

Russian markets were under pressure today, on speculation that the US may tighten its sanctions towards Russia on election meddling. Russian media published today the full text of a sanctions bill prepared by some US senators, last week. The two main measures are a ban for purchasing new OFZ issues and the suspension of USD accounts for Russian state banks. Beyond this, that confirms that many Republicans disapprove Trump’s soft approach towards Russia. 5y CDS is wider +9bp today, $RUB is up c2.5% and OFZs are wider 20-25bp in the belly of the curve (2-5y). The US House is back from summer recess in September, so no action should be taken by then, which does not mean the market can’t price in more Russian risk premium in the meantime.