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  • Emerging Markets Debt Daily

    Russian Inflation – On Best Behavior

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    March 06, 2020

    Russia’s inflation continued to moderate in February. Brazil resumed currency interventions, but it has limited impact on the real.

    It’s a major risk-off event out there, with the 10-year US Treasury yield falling to a mind-blowing 69bps this morning (see chart below). We keep a watchful eye on emerging markets developments, even though global issues overwhelm country-specific fundamentals. Russia’s disinflation is a case in point. Core prices undershot consensus once again in February, easing to 2.4% year-on-year and headline inflation moderating to 2.3%. The room for additional policy easing is clearly there, but it remains to be seen exactly how the central bank would use it in the weeks ahead.

    The Brazilian central bank resumed interventions trying to stabilize the currency, but the real nevertheless weakened by another 90bps this morning (as of 9:26am EST, according to Bloomberg LP). Global factors are partly to blame, but Brazil’s fundamentals (such as underwhelming growth) and a lack of clarity on pro-growth structural reforms are just as important. 

    Mexico’s gross fixed investments were slightly better than expected in December, with some tentative signs of bottoming out. Still, yearly growth was negative (-3%) and there are legitimate concerns that the coronavirus-related disruptions would push it further down. A counter-argument is that Mexico is among few countries that can benefit from a weak growth spell in China. But it will be at least a couple of months until we will get an official statistical confirmation of this fact. 

    Chart at a Glance: US Treasuries - Brave New World

    Chart at a Glance: US Treasuries - Brave New World

    Source: Bloomberg LP


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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