Thursday 24, February 2022

Ukraine

Russia seems to have decided on a full-scale invasion of Ukraine. Markets reacted strongly this morning, with near-dated Brent futures shooting up a huge amount. Various EU and other countries condemned Russia, but at the end of the day, Russia is not going to be locked out of SWIFT and is unlikely to suffer any really damaging sanctions. Nord Stream 2 is paused, but it seems to me that eventually the west will accept what Russia has done (just as it did in 2014 with regard to Crimea) and we will return to normality.

Stock markets outside of Russia did fairly well, with the NASDAQ shooting up by 3%, presumably on the basis that Biden will not take any decisive action which might increase gasoline prices, and the Fed will use the war as an excuse to delay rate increases and “quantitative tightening”. The market really does believe in the “Fed put”.

The SEC has started action against Elon Musk and his brother for insider trading. The stock went up.

The most dramatic change today was the “flattening” of the oil futures curve: the short-dated contracts zoomed up, but the longer-dated ones were much less affected.

Bonds were relaxed about everything: the 10Y yield changed by 3 bp! I guess this is the cancelling effects of inflation expectations and a flight to safe assets.

Investors continue to be concerned that Fed tightening will stifle growth in the world’s largest economy. Fed’s Mester said a rate hike in March is still reasonable, barring an unforeseen shift, while Fed’s Bostic said he’s open to four or more rate hikes, depending on the data. The Fed’s projections for six quarter-point rises this year are in line with what was factored in before the Ukraine attacks.

from Financial Juice.

Eurodollar University

Emil Kalinowski and Jeff Snider had a guest appearance on Blockworks “On the Margin”. They went through their argument that J Powell really is the Wizard of Oz and that he has no power except to the extent that he can influence expectations. Listen to the episode here or via your favourite app (mine is Pocketcasts).

GPG Key

I have a new public key. I decided to create a new key pair using ECC methods. You can send me stuff securely by using the following public key.

——-BEGIN PGP PUBLIC KEY BLOCK——-

mDMEYgQuhRYJKwYBBAHaRw8BAQdAW3de88vIF/nqYNxcbSxdcLlZXE4aIshQhA59 ol0G1S60L3N0ZXZlIChuZXcgRUNDIGtleSkgPHN0ZXZlLmhlbWluZ3dheUBnbWFp bC5jb20+iJoEExYKAEIWIQSd5D9AZ0Io9t1at5s/qQMg87g3kwUCYgQuhQIbAwUJ A8JnAAULCQgHAgMiAgEGFQoJCAsCBBYCAwECHgcCF4AACgkQP6kDIPO4N5McSwEA lLicmtvWe4O9noOuyt8TPjkhrJrzYSFW42ijoCKkqIkBAMpLtYmKrDTQJe6HqOD8 IH9Fg1tIfKogvc89EeKRsLUC =ZrlG ——-END PGP PUBLIC KEY BLOCK——-