Inflation Helped Most Indebted Eurozone Budgetary Positions Improve

With all the doom and gloom headlines you maybe somewhat surprised to find out there have been huge improvements in budgetary positions in many European nations. More significantly the biggest debtor nations have seen the biggest improvements. Why? Inflation is adding more to revenues than it is to spending, this is reducing debt-to-national-income ratios by both lowering debt and by boosting (nominal) income. Europe was affected by the Russian gas supply cut; however, it could have been much worse. The … Continue reading “Inflation Helped Most Indebted Eurozone Budgetary Positions Improve”

Germany’s Economy Unexpectantly Contracts in Q4

Germany’s gross domestic product (GDP) contracted 0.2 percent for the quarter in the final three months of 2022, following an upwardly revised 0.5 percent expansion in the previous period. The market expectations of 0.0% q/q. The contraction in Europe’s largest economy was mainly led by a decline in household consumption, amid rising interest rates and stubbornly high inflation. By comparison the US economy increased at an annual rate of 2.9% in the fourth quarter, ahead of consensus 2.6%. On a … Continue reading “Germany’s Economy Unexpectantly Contracts in Q4”

Turkey Central Bank Left Interest Rates Unchanged at 9% As Lira Hits New Lows

The Central Bank of Turkey left its key one-week repo rate unchanged at 9% in its January meeting on Thursday, as expected, saying the current policy rate is adequate.  The bank had cut key interest rates in November for the fourth consecutive month. The Turkish lira held a record low of 18.8 per USD after the announcement. There has been concerted pressure from President Recep Tayyip Erdogan wanting rates cut to stimulate the economy, but the collapsed Lira and soaring … Continue reading “Turkey Central Bank Left Interest Rates Unchanged at 9% As Lira Hits New Lows”

German 10-Year Bunds Close Year at Weakest Level since 2011

Germany’s benchmark 10-year Bund yield closed 2022 at 2.5% at the end of 2022, close to its highest level since July of 2011, and up from about -0.1% at the beginning of the year. Bunds being the inverse, closed at the weakest since then. Germany is facing severe head winds with the energy crisis bearing down with inflation pressures. However, the ECB is aggressively raising rates. Yields have been also supported by expectations of increasing government funding and falling excess … Continue reading “German 10-Year Bunds Close Year at Weakest Level since 2011”

Russian Stocks Plunge 44% in 2022

Russia’s MOEX Russia index closed Friday at 2,154, plunging 44% on the year. The ruble-based index reflected the fallout from the Russian invasion of Ukraine and consequent sanctions by Western countries. Russia’s action triggered investor’s exodus from oil and gas companies to McDonalds. The Moscow Exchange and the Central Bank of Russia both attempted to halt the selling, including closing the stock market for one month at the end of February, banning foreign investors from “unfriendly” countries, and prohibiting short … Continue reading “Russian Stocks Plunge 44% in 2022”

European Natural Gas Prices End Year Down 76% from Panic Highs, Near Pre-Ukraine Invasion Levels

European natural gas prices closed out 2022 at €76/MWh up almost 14% for the year, well off the panic highs and back around levels seen prior to Russia’s invasion of Ukraine at €75. These prices are more than 75% below record levels of €350 seen in August. The Dutch TTE futures are down 76.8% from the peak of $103.55 at $23.96. A number of factors came into to play. The economic fallout in the eurozone downturn extended into its sixth … Continue reading “European Natural Gas Prices End Year Down 76% from Panic Highs, Near Pre-Ukraine Invasion Levels”

Italian 10-Year Bond Yield Soars in 2022 to Near Ten-Year High

Italian 10-Year BTP government bond yields soared in 2022 to a yield above 4.6%, adding 350bps since the start of the year and remaining close to near decade high of 4.8% touched on November 12th. Global central banks raising rates, including the ECB to soak up excess liquidity and fight inflation bonds around the world fell hard and yields rose. Additionally increased fiscal risk in the Italian economy pressured yields higher. Italy saw more political turmoil in 2022 which resulted … Continue reading “Italian 10-Year Bond Yield Soars in 2022 to Near Ten-Year High”

Turkey Central Bank Cuts Left Interest Rates Unchanged at 9%, Bond Yield Hits Six Year Low

The Central Bank of Turkey left its key one-week repo rate unchanged at 9% in its December meeting on Thursday, as expected, saying the current policy rate is adequate.  The bank had cut key interest rates in November for the fourth consecutive month. There is concerted pressure from President Recep Tayyip Erdogan wanting rates cut to stimulate the economy but the collapsed Lira and soaring inflation perhaps enabled reason to take hold. The TCMB had signaled it will end the … Continue reading “Turkey Central Bank Cuts Left Interest Rates Unchanged at 9%, Bond Yield Hits Six Year Low”

Turkey Central Bank Cuts Interest Rates Another 150bp Ending Easing Cycle

The Central Bank of Turkey cut its interest rate by 150bps to 9.00% at its November 2022 meeting on Thursday. The bank cut key interest rates for the fourth consecutive month. The move was as expected. There is concerted pressure from President Recep Tayyip Erdogan wanting rates cut to stimulate the economy. This is despite the lira’s collapse, soaring consumer prices, and an unbalanced current account. The TCMB signaled it will end the rate-cutting cycle. Turkey’s currency, the lira remained … Continue reading “Turkey Central Bank Cuts Interest Rates Another 150bp Ending Easing Cycle”

Russia Suspending Participation in Black Sea Grain Initiative Grain Deal with Ukraine

Russian defense ministry on Saturday said Moscow was halting participation in the United Nations-brokered Black Sea Grain Initiative agreement after what it said was a Ukrainian attack on its Black Sea Fleet in Crimea. The agreement was signed in July but was set to expire on Nov. 19. There have been continual threats from Russian President Putin and the deal was seen as uncertain. The July deal ended a five-month Russian blockade of Ukraine’s ports. The statement from the defense … Continue reading “Russia Suspending Participation in Black Sea Grain Initiative Grain Deal with Ukraine”