Loading ...DOUG NOLAND
The Collapsing Periphery
December 12, 2014 posted by Doug Noland
The collapsing Periphery took aim at the Core.
This week saw things take a turn for the worse for the faltering Periphery Bubble. On the back of crude’s $8.03 collapse (to five-year lows), Venezuela CDS surged another 1,402 bps to 4,151 bps. Ukrainian bond yields surged 517 bps this week to 28.63%. Russian ruble yields jumped another 95 bps to 12.82%. On the currency front, the Russian ruble was slammed for another 9.25% (down 43.6% y-t-d). The Colombian peso fell 3.7%, the South African rand 2.1%, Indonesia rupiah 1.4%, Chilean peso 1.1% and Indian rupee declined 0.8%. The Chinese renminbi declined a not insignificant 0.6% against the dollar this week.
Importantly, the Periphery’s core has fallen under major duress. The Mexican peso was hit for another 2.7% (down 11.7%) this week, while the Brazilian real was down 2.5% (down 11%) and the Turkish lira 1.7% (down 6.5%). Brazilian CDS (Credit default swap) surged 48 bps to a one-year high 212 bps. Mexican CDS jumped 22 bps to a one-year high 112 bps. Brazilian stocks sank 7.7%. Turkey CDS rose 36 bps to 185 (high since October). Indonesian rupiah bond yields jumped 34 bps to 8.11%.
As EM currencies have faltered, local-currency denominated debt has been under pressure. Yet for the most part, dollar-denominated EM debt has performed well – that is, until this week. Importantly, the EM dollar-denominated bond dam has given way. Russia dollar bond yields surged 59 bps to 6.62% this week. Brazil dollar yields jumped 47 bps to 4.56%. Turkey dollar yields rose 45 bps to 4.45%; Mexico 18 bps to 3.53%; Peru 22 bps to 3.80%; and Colombia 28 bps to 3.94%. Venezuela dollar-denominated yields jumped 381 bps this week to 24.28%.
http://www.prudentbear.com/2014/12/the-collapsing-periphery.html#.VI2OzBZiNKM