December 23rd, 2009 - Modest rate cut Hungary’s central bank
The Hungarian National Bank reduced its base rate by 25 basis points, which was less than the expected 50 basis points. Hungary’s central bank, Magyar Nemzeti Bank, cut its key interest rate from 6.50% to 6.25% in order to stabilize the economy as the circumstances are rather unstable and to control inflation , which is at the moment higher than the central bank’s target, matching the rate of June 2006. So far in 2009, the Hungarian National Bank has reduced the key interest rate by 375 basis points, including the recent reduction.
Hungarian National Bank
The Hungarian Forint climbed to the highest rate of 190.59 in 5 days versus the Greenback by 8.05 a.m. ET, which is a 1.3% rise in comparison to Friday’s closing rate of 193.05.
The lower than expected rate reduction implicates that the Hungarian National Bank could end its monetary easing sooner than experts had predicted. However, it’s likely that additional monetary measures will be taken in the next few months, according to Capital Economics. “We still believe that the conditions for interest rates priced into the market are too high,” Capital Economics declared. The market outlook for the base rate to climb to 6.5% in the third and fourth quarter of next year is not likely considering the volatility in the real economy.
Hungary’s economy
Hungarian inflation leaped from 4.7% in October to 5.2% in November, while the central bank medium term target is at 3%. In the meantime, core inflation declined slightly from 4.9% in October to 4.8% in November. The Magyar Nemzeti Bank estimates an inflation rate of 3.9% in 2010 and 4.2% in 2009. From July through September, the Hungarian economy shrank by 1.8%, as it contracted by 1.9% in the second quarter. Hungary’s economy will shrink by 6.7% in 2009, while it will contract by 0.6% in 2010, according to the Hungarian National Bank.
Improvement
Recently, several components of Hungary’s economy seemed to have become more stable, due to stimulus measures, such as a number of consecutive interest rate reductions. In December, economic conditions in Hungary improved due to a recovery in business and consumer confidence, according to GKI Economic Research. Trade recovered and the pessimistic situation of industrial output improved in October.
25 December 2009
Russia's Central Bank Cuts Refinancing Rate To 8.75% From 9%
December 25th, 2009 - MOSCOW (Dow Jones)--Russia's central bank cut key interest rates Friday for the tenth time this year in an attempt to stimulate lending and turn back the tide of speculative capital that has flooded the ruble in recent months.
The reduction in the refinancing rate, the benchmark to which commercial banks tie their deposit rates, to a record low 8.75% from 9% is effective Monday. Other key rates, such as the one-day repurchase rate on central bank loans, were cut as well.
The reduction in the refinancing rate, the benchmark to which commercial banks tie their deposit rates, to a record low 8.75% from 9% is effective Monday. Other key rates, such as the one-day repurchase rate on central bank loans, were cut as well.
24 December 2009
Deposits vs Commodities 1999 - 2009
The last ten years have been the decade to invest in commodities. Here is the 10 year price increase in commodities since 1999:
The ganjlik 10-year deposit will provide 250% increase, which is the top 5 commodities, without the volatility.
The ganjlik 10-year deposit will provide 250% increase, which is the top 5 commodities, without the volatility.
19 December 2009
Armenia - up to 10% on USD deposits, 9.5% on EUR
Armenia Development Bank offers up to 10% p.a. on USD deposits and 9.5% for EUR.
The AKA-Credit Agricole bank offers up to 9.5% on USD deposits.
Armenia is rated BB- and has a 10% withholding tax on interest.
The AKA-Credit Agricole bank offers up to 9.5% on USD deposits.
Armenia is rated BB- and has a 10% withholding tax on interest.
18 December 2009
Traders bet on Brazil interest rates to rise
Dec 18, 2009 - Brazil Interest Rate Future Yield Rises to Highest in 10 Months.
Traders are increasing bets the central bank will start lifting the benchmark Selic rate from a record low in March as economic growth accelerates.
14 December 2009
My comment on investing with International Bank of Azerbaijan.
The most common question asked to me, is how safe do I REALLY think placing a substantial amount of one's wealth with International Bank of Azerbaijan is. What are the risks that are not enumerated anywhere...
For example:
1. How good is IBA, how risky is it, what could possibly go wrong? How could I lose my money, is the only way to lose money is the bank closing down in full, or is there other ways, default but reopening, just not paying at all, anything?. Moody's, Fitch, S&P, all their comments are medium in simple terms right? Would you personally deposit large sums of money into Azerbaijan banks?
My honest reply is:-
There are two risks with a bank like IBA:
o Individual credit risk - default due to bankruptcy.
Unless the economy totally collapses this is most unlikely. As the Azerbaijan economy is almost exclusively based on oil and gas this is inconceivable. The bank is very well managed, with loans issued on a financial basis, not “to those well connected”. Its loan portfolio well diversified to various industries i.e. construction, manufacturing, trade, consumer consumption, utility development, infrastructure, etc. It’s the National Development bank of the country, which means its main aim is to provide loans which will develop the country’s economy according to the Governments strategy.
Even if the bank makes some bad decisions regarding loans which impair its capital requirements, the international credit rating companies all acknowledge that the State would assist. The State obviously has the financial muscle to assist as it has $25 billion foreign reserves and banks total liabilities are a fraction of that. Throughout history everywhere in the world, the State always assists a National Development bank it controls because if that bank had to collapse, then the entire banking system would collapse. The bank currently has capital tier ratio approximately double the international normal banking requirements, meaning it is financially very strong.
High interest deposit rates in IBA’s case is not due to its frantic requirement for assets. It’s just in Azerbaijan since the Soviet days, high loan rates have remained, and therefore the bank can afford to offer high savings rates.
IBA’s speculative grade rating is due to the ceiling of its Sovereign rating. It’s just defined that no company can be higher than its Sovereign country rating.
o Sovereign risk - prevention of foreign debt repayment by State
It costs Azerbaijan $15 per barrel to extract oil. Anything above that will grow the economy. Even this year when oil collapsed to $30, its economy grew by 4%. Normal growth in past 5 years has been 30% per annum and I expect it to grow by double digits again in the near future. Even if war had to break out with Armenia the conflict would be limited to the outlying territory of conflict, just as in 1992. Political tension is the sole reason for its credit rating grade being one notch below investment grade. With $25 billion foreign reserves and virtually no outstanding bonds, the country can withstand turbulence.
See this report.
RISK REWARD PROFILE
The interest rate of 13% -16% p.a. is a unique arbitrage opportunity which may not be around for long. Russia banks used to offer 11%- 12% for USD deposits in 2001, now they offer rates at 3% - 5%. IBA support of the bank just adds value. Its economy is based on a better commodity than minerals (or property like Dubai!) I am very comfortable to recommend substantial portion of ones assets in Azerbaijan due to its risk-reward profile.
For example:
1. How good is IBA, how risky is it, what could possibly go wrong? How could I lose my money, is the only way to lose money is the bank closing down in full, or is there other ways, default but reopening, just not paying at all, anything?. Moody's, Fitch, S&P, all their comments are medium in simple terms right? Would you personally deposit large sums of money into Azerbaijan banks?
My honest reply is:-
There are two risks with a bank like IBA:
o Individual credit risk - default due to bankruptcy.
Unless the economy totally collapses this is most unlikely. As the Azerbaijan economy is almost exclusively based on oil and gas this is inconceivable. The bank is very well managed, with loans issued on a financial basis, not “to those well connected”. Its loan portfolio well diversified to various industries i.e. construction, manufacturing, trade, consumer consumption, utility development, infrastructure, etc. It’s the National Development bank of the country, which means its main aim is to provide loans which will develop the country’s economy according to the Governments strategy.
Even if the bank makes some bad decisions regarding loans which impair its capital requirements, the international credit rating companies all acknowledge that the State would assist. The State obviously has the financial muscle to assist as it has $25 billion foreign reserves and banks total liabilities are a fraction of that. Throughout history everywhere in the world, the State always assists a National Development bank it controls because if that bank had to collapse, then the entire banking system would collapse. The bank currently has capital tier ratio approximately double the international normal banking requirements, meaning it is financially very strong.
High interest deposit rates in IBA’s case is not due to its frantic requirement for assets. It’s just in Azerbaijan since the Soviet days, high loan rates have remained, and therefore the bank can afford to offer high savings rates.
IBA’s speculative grade rating is due to the ceiling of its Sovereign rating. It’s just defined that no company can be higher than its Sovereign country rating.
o Sovereign risk - prevention of foreign debt repayment by State
It costs Azerbaijan $15 per barrel to extract oil. Anything above that will grow the economy. Even this year when oil collapsed to $30, its economy grew by 4%. Normal growth in past 5 years has been 30% per annum and I expect it to grow by double digits again in the near future. Even if war had to break out with Armenia the conflict would be limited to the outlying territory of conflict, just as in 1992. Political tension is the sole reason for its credit rating grade being one notch below investment grade. With $25 billion foreign reserves and virtually no outstanding bonds, the country can withstand turbulence.
See this report.
RISK REWARD PROFILE
The interest rate of 13% -16% p.a. is a unique arbitrage opportunity which may not be around for long. Russia banks used to offer 11%- 12% for USD deposits in 2001, now they offer rates at 3% - 5%. IBA support of the bank just adds value. Its economy is based on a better commodity than minerals (or property like Dubai!) I am very comfortable to recommend substantial portion of ones assets in Azerbaijan due to its risk-reward profile.
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