“The worst day in history writes Belarus Gulag: investors in Russia lost $110 billion in a few hours.”
February 24, 2022 will go down in the history of Russian exchange trading as the “blackest” of all Thursdays.
Investors in Russian assets lost $111 billion in hours after Putin announced the start of a large-scale military aggression against Ukraine that the Kremlin and Foreign Ministry denied for weeks.
From the very first minutes of the session on the Moscow Exchange, “blue chips” collapsed by 10-20%, after which trading was stopped, and after their resumption, the market collapsed dead.
By noon, when the fall of the RTS index, which includes four dozen largest Russian companies, reached 50%, the Central Bank intervened: the regulator began to sell the currency to stabilize the ruble and banned “short sales” – that is, speculation on falling quotes.
But this had only a weak effect: following the results of the worst day in the history of the domestic market, the RTS lost 39.44%, or $76 billion in capitalization.
Panic gripped the market of ruble public debt in the amount of 15.5 trillion rubles.
Prices of long OFZs collapsed by 12-16%, yields jumped to 13-14% per annum. Short securities sank by 2-4%, and their rates came close to the 15% mark.
The RGBI ended the day with a 14.13% drop, breaking even December 2014 records. This brought investors losses on negative revaluation in the amount of about 2.1 trillion rubles ($25 billion).
The collapse in the market of foreign currency government debt of the Russian Federation completely shocked even the worldly-wise.
The prices of long dollar notes nearly doubled: Russia-42 and Russia-43 issues were sold for half their face value, like defaulted or pre-bankruptcy junk bonds.
Notes maturing in 2029 fell by 43%, in 2027 – by 31%. Considering the size of the market ($39 billion), investors could lose about $10 billion in a day.
The ruble updated its historical low against the dollar – 89.6 rubles, but thanks to the central bank, which pours currency into the market from reserves, it ended the day at 84.9750.
In addition to direct interventions, the Central Bank offered banks additional currency through swaps ($5 billion) and repos (up to $50 billion).
The market expects that the next step will be an increase in the key rate and puts in quotes swap values up to 16% on the horizon of 3 months and 19% in six months.
The market as it was before Putin’s military aggression against sovereign Ukraine will no longer exist.
The world of Rutskoi needs to prepare for the fact that the Russian Federation, in terms of market infrastructure and everything in general, will be thrown back many years into the past.