Russian rates tempt the carry traders

At the end of last week, Strategas, the New York-based research boutique, presented the "wall of worry" issues currently exercising its clients.

It was quite a long list, which is probably a good thing because it suggests investors are not flouncing about without a care (though some debt prices suggest they are oblivious to pockets of risk).

The usual suspects were noted; including US-focused tripwires such as an an economic soft patch, a bungled Federal Reserve loose-policy exit and the strong dollar's impact on earnings.

A China hard landing, deflation and more Greece angst also featured.

Another factor was the chance of a Russian banking crisis infecting Europe's financial system. This may be pertinent because it seems investors are becoming increasingly more sanguine about Russia.

The Ukraine crisis has slipped from the front pages and the price of oil, to which the Russian economy is highly sensitive, is up 25 per cent from the low seen at the start of the year.

Consequently, the rouble seems to have moved into the sweet region where concerns about credit and geopolitical risk are subservient to "carry trade" desires.

The Russian central bank has interest rates at 14 per cent - tempting when Switzerland is selling new paper at a negative yield. Moscow's 10-year bond yield is 11.4 per cent, down from nearly 16 per cent in December as budget fears ease.

Next resistance for the rouble may be the 200-day moving average around Rbs49.3 per dollar.

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