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Moodys expects Nvidias (NVDA.O) balanced capital allocation policy to support its "exceptionally strong net cash position and credit metrics."Moodys affirmed Nvidias (NVDA.O) Aa1 rating with a positive outlook.On August 19th, Kenji Koshimizu, co-head of Mizuhos global markets division, stated that the Bank of Japan (BOJ) may raise interest rates again as early as September, potentially increasing the frequency of policy adjustments from approximately once every six months to once every three months. Koshimizu noted that the weak yen and inflationary pressures are pushing the BOJ to accelerate its actions, and he does not rule out two rate hikes before the end of the year, bringing the policy rate to 1.5%. The market currently anticipates a 78% probability of a rate hike by the BOJ on September 18th. He stated that Mizuho will continue its conservative Japanese government bond investment strategy, focusing only on inflation-linked bonds and short-term government bonds. Although the 10-year JGB yield has risen to a 30-year high, it remains below Japans nominal economic growth rate of approximately 4%. Koshimizu believes that global structural changes and investment growth may further push up Japans neutral interest rate, while inflation risks remain skewed to the upside. Regarding the yen, he stated that the joint intervention by the US and Japan reflects both sides desire to prevent further yen depreciation, but the yens weakness is partly due to Japans loose monetary policy. He anticipates that the Japanese economy is undergoing a significant transformation in decades, and while the Japanese stock market remains attractive, financial market volatility may intensify.According to relevant documents, Brazilian energy company Cosan has formally notified the New York Stock Exchange of its intention to delist its American Depositary Receipts (ADS).August 19th - Bond traders are once again adjusting their strategies. After a series of data suggested that the Federal Reserve is unlikely to raise interest rates for the remainder of the year, options market bets are attempting to hedge against the risk of the Fed turning to rate cuts in 2027. This dovish bet contradicts recent movements in the U.S. Treasury market: long-term bond yields have risen to multi-year highs because a Fed wait-and-see approach would allow inflation to remain above target for a longer period. Options traders, whose policy path is closely tied to the Feds, are turning their attention to signs of a weakening U.S. economy, believing this could trigger a market reversal. This move emerged after data released last week showed that inflation and consumer demand slowed in July, cooling market expectations for a rate hike at the Feds September meeting. Options market participants subsequently began adjusting their positions, reducing the magnitude of rate hikes priced in for the coming months in the swap market. Some options are even considering hedging against a potential rate cut by the middle of next year. "The fear of rate hikes has eased," said Jeff Shul, head of interest rates at Constitution Capital, noting that recent positions betting on this outcome are being liquidated.

The EU-Russia Energy Standoff is Further Complicated by Russia's Demand for Rouble Payments for Gas

Charlie Brooks

Jun 22, 2022 11:42

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Russia's demand that so-called "unfriendly nations" pay for natural gas in ruble would likely only provide short-term support for the sanctions-affected Russian ruble by using the country's energy clout over Europe.


Putin has requested that the government tell the state-controlled gas monopoly Gazprom to alter current contracts so that "unfriendly nations," including EU member states, begin paying in roubles for natural gas imports. The Bank of Russia (CBR) will build a payment processing method.


The short-term support for the rouble will come at the expense of Russia's ability to persuade the European Union to lessen its dependence on Russian energy imports as quickly as possible, a process that will take time due to infrastructural constraints in the natural gas industry in particular.


The outlook for Russia's financial benefit is modest.


Since sanctions froze about half of Russia's international assets, Russia has mandated that exporters sell 80% of foreign currency earnings to bolster the rouble. By requiring purchasers of Russian natural gas to convert foreign money for roubles, this rate of rouble conversion for gas exports grows to one hundred percent.


Nonetheless, Gazprom's foreign-currency sales threshold might have been extended to 100 percent anyway. The attempt to demand payments in roubles is a strategic response against the EU based on Russia's clout as the most significant supplier of natural gas to Europe, with Russian shipments accounting for more than 75 percent of the total gas demand of several nations in central and eastern Europe.


The Russian government is also attempting to increase the CBR's capacity to manage the currency by requiring natural gas trades to be conducted in domestic currency and major foreign-currency flows to be routed through the CBR, a sign that financial sanctions have diminished the central bank's ability to steer the Russian economy.


Rouble payments for gas might strengthen the CBR's ability to operate under the existing sanctions system, given the CBR's present inability to trade with European Union central banks.


The EU confronts increased energy trade complexities and a danger of gas supply interruptions.


If EU nations claim that the conversion would constitute a violation of contract, Russia's most recent demand might lead to renegotiation of gas contracts and changes in the term of gas contracts, in addition to legal challenges. Approximately 58 percent of Gazprom's gas sales to Europe and other regions are paid in euros, while 39 percent are handled in dollars. Any legal impasse heightens the possibility of interruptions in Russian exports to Europe, which might have a negative impact on some nations in the near term.


Long-term, Russia's new policies are expected to hasten the European Union's diversification away from Russian oil and gas. Before 2030, the European Commission has devised a strategy to make Europe independent on Russian fossil fuels. This proposal might reduce the need for Russian gas by two-thirds by the end of the year. In the near future, as a result of Russia's action, the EU might decide to buy less Russian gas.


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