Morning Brief: From Sugar Rush to JPMorgan Russian Bond Payments
Mar 20, 2022
Bitcoin Holds Above $40K as Market Adjusts to Higher Rates From Federal Reserve
Bitcoin (BTC) is experiencing a calm day one day after the US Federal Reserve raised its benchmark interest rate for the first time in more than three years. It is presently trading around $40,800.
Both traditional markets and cryptocurrencies dropped down immediately following the US central bank's rate rise announcement on Wednesday, but quickly recovered those losses and more by the end of the day.
Fed Chair Jerome Powell stated during the post-meeting press conference that the US economy is robust enough to absorb several rate rises this year and that he does not see a recession on the horizon. When it comes to other prominent cryptocurrencies, Ether (ETH) and Solana (SOL) are both slightly outperforming Bitcoin today, each up about 2%. Continue reading
JPMorgan Processed Russia Bond Payments, Sent Money to Citi
According to sources familiar with the situation, JPMorgan Chase & Co. processed cash meant for interest payments on Russian government dollar notes and transferred them to Citigroup Inc., while investors waited a second day to get the $117 million.
JPMorgan served as Russia's correspondent bank for payments to Citigroup, which serves as payment agent for the bonds. JPMorgan sent the funds to Citigroup on Wednesday after obtaining necessary permits from US regulators, one of the sources said. As of late Thursday, European bondholders of Russia's sovereign debt had not gotten any indication of the cash, and S&P Global Ratings cautioned that the "technical problems" in distributing the funds to investors increased the possibility of a default – either this time or in the future.
"If funds are unavailable to investors or if a payment is made in a currency not specified in the terms of the obligation and we feel the investor does not consent to the alternative payment," S&P analysts said in a statement, cutting Russia's foreign-currency rating to CC from CCC-. Nonetheless, JPMorgan's action fueled hope that the bonds may still be settled in dollars, driving the country's bond prices higher throughout the maturity spectrum. According to credit-default swap pricing, the implied likelihood of Russia defaulting within the year decreased to 57 percent, down from 59 percent. It went as high as 80% last week.
Sugar Rush: Russia Probes Price Hikes and 'Unjustified' Shortages
Russia's Federal Antimonopoly Service (FAS) announced on Thursday that it was conducting "anti-cartel" inspections of major sugar producers in response to a dramatic spike in sugar prices and "unjustified" shortages in some locations due to buyers' rush to buy. Many Russians view sugar, along with basics such as buckwheat and salt, as a necessary item to hoard during times of crisis, and have rushed to purchase supplies since Western sanctions against Russia over the Ukraine conflict weakened the rouble and increased food costs.
Annual inflation in Russia hit its highest level since late 2015 on March 11, and sugar prices increased 12.8 percent in the past week, according to figures released Wednesday by the statistics service Rosstat.The authorities have stated that there is no reason to rush to purchase food goods.
Russia has suspended sugar exports until August 31 and established a duty-free limit of 300,000 tonnes of sugar and raw sugar imports as part of measures aimed at containing local food inflation. These measures, together with a planned increase of 1.1 million hectares in the country's sugar beet planting area by 2022, would boost domestic supplies, the agricultural ministry stated earlier this week. Continue reading
A Food Crisis Is Looming. This Fertilizer Stock Stands to Gain.
Russia's invasion of Ukraine, economic isolation, and shutdown of Black Sea ports used to carry products have exacerbated global hardships in ways that many do not comprehend. Russia is one of the world's top energy producers, and market disruptions have garnered widespread attention.
Russia is also a significant producer of nitrogen and other compounds that are vital to the world's agricultural crops, albeit less obviously. According to Goldman Sachs, Russia and its ally Belarus account for around 35% of global potash supply and 40% of capacity. Russia accounts for around 15% of worldwide exports of different kinds of nitrogen. "If suitable fertilizers are not applied, agricultural output would drop, particularly in the corn belt of the United States and the wheat belt of Europe," Bertioli adds. He calculated that nearly half of the world's population is supported by nitrogen fertilizer.
Investors concerned about how the conflict has wreaked havoc on the fertilizer markets may consider Mosaic (MOS). Goldman recently lifted its price objective for the phosphate and potash agricultural fertilizer provider to $83 from $50, while also upgrading the stock to Buy from Neutral.Mosaic is anticipated to earn "almost 50% of its current market cap in FCF [free cash flow] over the next three years," Samuelson told clients. Mosaic now has a market capitalization of over $21 billion. The stock has traded in a 52-week range of $28.26 to $64.71. It is up 47% so far this year and almost 70% year to date.