The Baltic wave

Talk that IMF officials were inofficially promoting a depegging of the Lvl in conjunction with an IMF package were officially confirmed by the Latvian finance minister, Atis Slakteris and a finance department spokesperson yesterday.

The COL has already spend 23% of its currency reserves, without any external speculation. The domestic need for hard currency is set to increase. This might very well break the currency regime from within. It seems we are inching closer to a float.

As if the Eastern front wasnt looking gloomy enough, GS earlier in the week released their new Russian forecast. They now expect the RUB to decrease by 25% vs a basket of Eur and Usd for 2009. Well, if they say 25% over a year, the decoded message might perhaps be 40% in 6 months.

It is not looking good, not at all as long as Oil is getting drilled. (Pardon the punt). The Emerging implosion story will have to run its course before assets have a sustained turn. We still have a bit to go there, and there are other waves coming as well, the Russian one, the Chinese one, the Brazil one, etc etc
Sounds too bearish? Perhaps, but Im just calling it as I see it.

We aint seen nothing yet when it comes to Emerging market yield curve steepenings. This seems to be an opportunity knocking together with the ensuing currency weakness. For individuals it might be tricky getting access to this one. For institutional market participants, it is easy peasy

Eur/Sek to test the all time highs of 10.68, targeting 11.00 on a break. A float could take it beyond that though.
My guesstimate would be that SEB and Swedbank would be diving for 25 and 15 Sek respectively, on a float.
I am increasing my long Swedbank and SEB puts, Sek puts vs Euro on the back of it.

As always, good luck.






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