Moody's upgraded its outlook for Russian credit to stable - BBH

Research Team at BBH notes that Moody's upgraded its outlook for Russian credit to stable.   

Key Quotes

“The Ba1 rating is one step below investment grade, but if Russia continues its fiscal consolidation, oil prices stay firm, and the economy continues to emerge from an almost two-year recession, investment grade status may be possible later this year.  Russia's 5-year CDS finished last week near 1.82%, which is just below Italy's CDS (1.87%).  The ruble has appreciated 4.8% this year, tying it with the Taiwan dollar for fourth place among emerging market currencies.”

“Last year, the ruble's gain of 20.1% put it in second place behind the Brazilian real, which rose nearly 21%.  Brazil's easing cycle is expected to take another step.  The Selic is expected to be cut by another 75 bp to bring it to 12.25%.  It peaked at 14.25%, and this would be the fourth move in the cycle.  Inflation has fallen much faster.  It has been halved.  Since shortly after the US election last November, the dollar has fallen nearly 13.5% against the Brazilian real.  On February 16 a potential reversal pattern was recorded.  Initial resistance is seen in the BRL3.10-BRL3.15 band.”