VIX up as GeoPolitical Risk rises. Dollar jumps on the invasion, but eases today, Treasury yields down due to safe haven effects. Anticipated interest rate increases moderate.
Figure 1: Geopolitical Risk index – Acts (blue, left scale) and VIX (brown, right scale), and Source: CBOE via FRED, Caldara and Iacoviello.
Figure 2: Nominal trade weighted value of US dollar against advanced country currencies (blue, left log scale), and VIX (brown, right scale). 2/28 exchange rate observation based on DXY index movement. Source: Federal Reserve Board, CBOE via FRED, yahoo.finance, and author’s calculations.
Figure 3: Ten year Treasury yield, % (blue, left scale), and VIX (brown, right scale). Source: Treasury, CBOE via FRED.
I find it interesting that implied interest rates 2 to 3 months ahead are fairly stable, after having dropped from mid-February.
Figure 4: Implied average of Treasury interest rates 2-3 months ahead (blue, left scale), and VIX (brown, right scale). Source: Treasury via CBOE via FRED, and author’s calculations.
U.S. Credit spreads are showing greater effects over the past week or so. That’s constant with reduced Fed rate hike expectations. Policy makers are sensitive to Credit spreads.
I haven’t heard of any repo troubles in the U.S., but Germany intervened to ease a repo squeeze last week. Collateral scarcity was the problem – which is to say nobody wants to let go of safe assets.
There is no reduced expectations. They have been pretty clear on 7 bikes for 3 months now which would restore precrisis levels.
Once again, you have no idea what you’re talking about. This is not a matter of opinion. Market pricing is clear; rate hike expectations are down since before the invasion.
https://www.nytimes.com/2022/02/28/opinion/putin-military-sanctions-weakness.html
February 28, 2022
Russia Is a Potemkin Superpower
By Paul Krugman
Beware, Vladimir Putin: Spring is coming. And when it does, you’ll lose much of whatever leverage you had left.
Before Putin invaded Ukraine, I might have described the Russian Federation as a medium-size power punching above its weight in part by exploiting Western divisions and corruption, in part by maintaining a powerful military. Since then, however, two things have become clear. First, Putin has delusions of grandeur. Second, Russia is even weaker than most people, myself included, seem to have realized.
It has long been obvious that Putin desperately wants to restore Russia’s status as a Great Power. His already infamous “there is no such thing as Ukraine” speech, in which he condemned Lenin (!) for giving his neighbor what Putin considers a false sense of national identity, made it clear that his aims go beyond recreating the Soviet Union — he apparently wants to recreate the czarist empire. And he apparently thought that he could take a big step toward that goal with a short, victorious war.
So far, it hasn’t worked out as planned….
https://www.nytimes.com/2018/05/02/books/review/nikolai-gogol.html
May 2, 2018
The Russian Comic Writer Who’s an Antidote to Mad Times
By Julian Lucas
Gogol, fabulist of an empire that gave us the phrase “Potemkin village,” feels almost predestined to illuminate this particular moment, the collective hangover of larceny losing its luster.
When Pavel Ivanovich Chichikov drives his carriage into the provincial town of N., he plans to carry out the most macabre heist in literature. He wants to buy dead “souls,” a word that in czarist Russia referred not only to immortal spirits but also to serfs. A grim speculator in human property, Pavel Ivanovich plans to buy and then mortgage peasants whose deaths have not yet been registered by the census. His scheme is the foundation of Gogol’s masterpiece, a comic novel that he conceived as the cornerstone of a national epic….
Well, he always idolized the Stalin era Russian pertiod.
Gregory,
Nikolai Gogol died in 1852. Sorry, he did not “idolize the Stalin era Russian period,” given that Stalin did not come to power over 70 years after he died. Sheesh.
Colonel Vindman has told MSNBC that Russia has lost 5,000 dead in Ukraine so far, as compared to 15,000 in Afghanistan. That seems to be right, according to news accounts, though the fog of war makes any such comparison iffy. Press accounts also show Russia losing 191 tanks, 29 fighter jets, 29 helicopters and 816 armoured personnel carriers. Yikes. I haven’t seen loss tallies for Ukraine, but I hope they are nowhere near the Russian numbers.
There is a lot of “Putin stepped in it” talk from the press and pundits today. At the same time, there are indications that Russia has committed reinforcements, so let’s not get carried away. Russia can win in a fight with Ukrainian troops if Putin is willing to pay the price. In Syria, he was happy to bomb population centers. Holding Ukraine is another matter, but we have to hope he is not as bloody-minded as he wants to appear. The whole nukes thing looks a little like Nixon’s “crazy world leader” routine during Vietnam, but maybe Putin is nuts. That would be bad for everyone.
Russia needs to retire Putin before we find out his true state of mind.
I have high high high regard for Colonel Vindman, and if he gave those numbers, and I trust you Macroduck as well and take you at your word, I believe those numbers. I respect Colonel Vindman as much as you can respect any human being. And I’m gonna “tell on myself” here, I think I already have actually a ways back. A big part of the reason I was convinced there was going to be an invasion, aside from the troops all surrounded on the border and Belarus and that~~is seeing Colonel Vindman on “DW” German TV saying it was a “foregone conclusion” Putin would invade Ukraine. That was literally ALL I need to hear to be convinced. I trusted Colonel Vindman as a man of honor, a gentleman in the “old school” sense, that he wasn’t gonna say that unless he had damned good reason.
MD,
Well, as of watching SOTU, I just went digging around, and it looks like that 40 mile convoy on the way to Kyiv I saw Carlson and Hannity were predicting would take Kyiv has stalled out before getting there. Running out of fuel or whatever. Maybe they will get going again, but they seem to be absurdly bogged down.
I do not know if i believe it, but I saw a report in the British tabloid Sun claiming a planned naval assault on Odessa got skuttled because there was a mutiny on a Russian ship. If that is the case, Putin really is in deep doo doo.
I had seen that Kherson had fallen, but apparently while it is surrounded, it remains unconquered. Mariupol is not even surrounded. It looks that Kharkiv is surrounded and getting pounded hard, but is also still holding out and not conquered. The only urban places that Putin’s forces have actually conquered are a few relatively small ones near the former edges of control of the Donbas republics, such as the port of Berdyansk, right on the border of the Donetsk PR.
I have been too optimistic about aspects of this in the past, but if what I am seeing is for real, this might be over soon. I do hope somebody in Moscow is getting it together to get Putin out of power, the sooner the better.
Is VIXCLS just a data object to you? Do you like to pull data series from some black box that you put all your faith in, then cycle through chartcrime after chartcrime till you mine a few charts that tell a political story you like?
What if your data source was compromised, and all your data points are made up lies? How would you even know?
Well, what about yourself??? You seem to support data points that go with your biases.