27 Jan 2015
Russia's credit rating cut to junk status - SocGen
FXStreet (Bali) - Societe Generale shares its thoughts following Russia's credit rating cut to junk status, noting that the timing was quite aggressive.
Key Quotes
"Was this a surprise? Probably not terms of this downgrade materializing, although the timing was quite aggressive and quite a bit earlier than we had foreseen. In principle, S&P had a window extending until April to review the rating."
"In the near term, I expect some more turbulence for Russian assets across all segments. You would think that this move was priced in, but it will nonetheless have a material effect."
"In fact, the RUB appears particularly vulnerable after the move earlier today, which will test the resolve of the central bank. The CBR is in credibility rebuilding mode, which means it has little room for error."
"Looking ahead, there are two major considerations to watch for: 1/to what extent sovereign debt investors with rating constraints will engage in forced selling of Russian debt; and 2/whether bottom-fishing investors return to go long RUB after the initial weakness."
Key Quotes
"Was this a surprise? Probably not terms of this downgrade materializing, although the timing was quite aggressive and quite a bit earlier than we had foreseen. In principle, S&P had a window extending until April to review the rating."
"In the near term, I expect some more turbulence for Russian assets across all segments. You would think that this move was priced in, but it will nonetheless have a material effect."
"In fact, the RUB appears particularly vulnerable after the move earlier today, which will test the resolve of the central bank. The CBR is in credibility rebuilding mode, which means it has little room for error."
"Looking ahead, there are two major considerations to watch for: 1/to what extent sovereign debt investors with rating constraints will engage in forced selling of Russian debt; and 2/whether bottom-fishing investors return to go long RUB after the initial weakness."