Russian ruble trading remains puzzling to most. Levels are not a reliable indicator of offshore activity, while the forward market is quite clearly broken, which suggests that signs of stress remain despite a more reassuring message from the Bank of Russia (CBR), economists at TD Securities report.

More CBR easing ahead

“The CBR delivered an unscheduled and surprise 300bps Key Rate cut to 17.00%. We are compelled to revise our expectations to add more CBR easing ahead.”

“The CBR's focus is rapidly shifting to growth from inflation. The Bank states reduced financial and inflation risks, especially as the ruble has now appreciated to pre-war levels. But we think inflation will remain a problem for Russia.”

“The final hint that the currency market is mostly unreliable, and levels should not be taken as proof of success of the CBR's attempt to regain control of the RUB, is the extreme volatility recorded in forwards.”

“The forwards market is broken. Levels keep marking higher and lower, with traders only concerned about covering the day-to-day funding and cash balances, which leads to crazy fluctuations of the O/N and T/N implied-yield levels between 10% and 50% – this is a clear symptom that not much is right in the RUB market. And, therefore, despite the reassuring message the CBR is giving the market, indirect signs of stress appear in this direction.”