We can see the effects of the Ukraine War on the financial markets in the charts below. These charts are updated daily. They help us get a sense of how investors see how the war is going, and its effects on the world economy, now and in the near future.
Ruble vs. US Dollar
- Higher values means that the US Dollar buys more rubles, indicating a stronger dollar and a weaker ruble
- A weaker ruble suggests less demand for Russian goods and services and a weakening Russian economy
source: tradingeconomics.com
Russian Stock Market
- Lower stock prices suggest expectations of lower future earnings for Russian companies. It can also mean less demand for Russian securities
- The Russian stock market has been closed since the end of February
source: tradingeconomics.com
Gold
- Investors demand gold as an inflation hedge, as a store of value, and to hedge against uncertainty and instability
- Higher gold prices may suggest increased inflation concerns and general anxiety
source: tradingeconomics.com
Crude Oil
- Higher crude prices may reflect increased demand (due to strengthening world economy) or reduced supply. Reduced supply results from actual and threatened sanctions, and other supply disruptions.
- Higher crude prices may suggest a worsening of supply conditions
source: tradingeconomics.com
US Stocks: S&P 500
- Lower stock prices suggest expectations of lower future earnings and/or reduced demand for US securities
Customize | Download Data | FRED – Economic Data from the St. Louis Fed
US Ten Year Treasury Note
- Investors buy Treasury notes when they expect low inflation, a weaker economy, or prefer safer investments. Increased demand increases prices and reduces yields (interest rates).
- Recently, investors are demanding safer investments like Treasury securites (which reduces yields). This may be partially offset by inflation concerns (which would cause investors to demand higher yields)
source: tradingeconomics.com
US Treasury Yield Curve Slope
- The difference in yields between 10-year and 2-year treasury securities reflects the extra income investors demand to purchase longer term securities
- A reduced gap suggests expectations of a slowing economy and increasing chances of recession. This could mean lower interest rates in the future
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIJg&width=670&height=475
US 5-Year Breakeven Inflation Rate
- The difference between nominal (regular) treasury yields and inflation protected yields reflects investors’ expectations of inflation
- Higher breakeven inflation rates reflects expecatations for faster prices increases
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIJy&width=670&height=475
US Bond Credit Spreads
- The difference between riskier corporate bond yields and US Treasury yields indicates how much additional yield investor need to lend to corporations compared to the almost-risk free US government.
- Higher spreads indicate reduced confidence in business credit-worthiness
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIK6&width=670&height=475
CBOE Volatility Index: VIX
- The VIX measures the expected volatility of (30-day options on) the S&P 500 stock market index
- Higher levels suggest greater expected volatility and uncertainty
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIJH&width=670&height=475
Federal Reserve Policy
- In a reverse repo, the Fed temporarily sells securities into the open market, which drains liquidity. The goal is to raise the Fed Funds rate, slow the economy, and slow inflation
- Reduced revers repo use may mean less effort to drain liquidity
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIU0&width=670&height=475
Cryptocurrency
- Cryptocurrency is virtual money that is created and trades on a non-centralized market. They do not represent a claim on assets; value results solely from limited supply
- Lower prices may suggest reduced demand for risky assets
https://fred.stlouisfed.org/graph/graph-landing.php?g=MIKX&width=670&height=475
Russia Credit Default Swap
- Credit default swaps are derivative products that help protect a bondholder from default, much linke insurance. If a borrower default (fails to pay principal or interest), the swap pays for losses according to a fomula. Otherwise, the purchaser of the protection continues to pay a premium.
- Higher and increasing premiums indicate a greater risk of default.
https://www.investing.com/rates-bonds/russia-cds-5-years-usd
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