At 40% recovery rate, credit default swaps (CDSs) imply 100% probability of default. Ratings agencies have downgraded Russian debt.
Russia Drops the Policy Rate – What Does It Mean?
The ruble has stabilized at near pre-invasion levels, and the Central Bank of Russia drops the policy rate to 17%. What’s going on?
“High-frequency macroeconomic risk measures in the wake of the war in Ukraine”
In a VoxEU post by Laurent Ferrara, Matteo Mogliani, and Jean-Guillaume Sahuc today, applying a growth-at-risk (GaR) approach (Ferrara et al. 2022, ungated 2020 WP version) they estimate they downside risk to Euro area vs. US GDP q/q growth.
What to Make of the 10yr-2yr and 10yr-3mo Spreads
As is well known, the recession talk has surged in the wake of the (short-lived) inversion in the 10yr-2yr spread.
Recession in 2023?
From Folkerts-Landau and Hooper at Deutsche Bank, yesterday:
…inflation in the US and Europe has now reached levels that have forced the Fed and
the ECB to pivot their monetary policy stances dramatically. As a result, we now
expect the US economy to be in outright recession by late next year, and the EA
in a growth recession in 2024…
Ten year-two year Spreads around the World
There’s been a lot of commentary regarding the inversion of the US yield curve, specifically a negative 10yr-2yr spread. Here’s a graph depicting 10yr-2yr spreads (aka “2s10s”) for several economies.
Inflation Expectations and Forecasts
Market expectations for inflation over next five years as of today:
The Employment Release and Business Cycle Indicators as of April 1
Here’s a picture of several key macro indicators followed by the NBER BCDC, including today’s employment release and monthly GDP, and yesterday’s consumption and mfg/trade industry sales numbers. The recovery continues.
Inflation since 1960
Figure 1: Headline CPI inflation, year-on-year (blue), and Core (brown), both in %. NBER defined recession dates peak-to-trough shaded gray. Source: BLS, NBER.
The Ruble vs. Exchange Market Pressure in Russia
The value of the ruble has returned to pre-invasion levels [1]. But what I am more concerned about is exchange market pressure. And there, we are at sea.