Trader: 'Investors Know Central Banks Are Just As Deeply Into These Trades As They Are'

First thing Monday morning, Donald Trump raised the specter of a currency war (apparently a trade war and a shooting war aren’t enough for him – he needs to complete the trifecta) by accusing Russia and China of “playing games”, in a bizarre tweet considering the circumstances surrounding the ruble’s collapse and also considering the Treasury’s decision to avoid naming China a currency manipulator on Friday.

When it comes to the new sanctions on Russia, it looks like Haley might have gotten a little ahead of herself or, more likely, Haley repeated what she had been told and then Trump decided to walk it back. “We are considering additional sanctions on Russia and a decision will be made in the near future,” Sarah Sanders says in a statement Monday morning.

As a reminder, Mnuchin essentially bailed out the ruble last week as the currency legged even lower following Trump’s infamous “missiles” tweet – ol’ Steve said he’s sticking with the plan to not target Russian sovereign debt for the time being.

USDRUB

“Our sense was that many large international investors refrained from any desperate exodus of Russian bonds last week,” SocGen’s Yury Tulinov and Phoenix Kalen write, in a new note.

Record high foreign ownership (34% of Russia’s ruble debt) will likely mean it stays insulated from sanctions, but the “nuclear option” of targeting OFZs will hang over Moscow’s head as long as tensions with the West are running high.

Yet through it all, markets are relatively calm to start the week, a situation that former trader and current Bloomberg columnist Richard Breslow calls “all too familiar not to be believed.”

After documenting how the world collectively inhaled on Friday as the U.S., the U.K., and France launched coordinated strikes on the Assad regime, Breslow notes that despite an escalation in the rhetoric over the weekend, on Monday morning there was little evidence that investors were harboring “an abundance of caution.”

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Disclosure: None of what I write here is to be construed as advice to buy or sell any kind of asset. It is merely my personal and not my professional opinion. Any asset can go to zero.

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