Malaysia Default Risk Drops, Ringgit Gains as Russia Ends Drills

The cost of insuring Malaysian debt fell to the lowest level in more than two months and the ringgit gained after Russian military exercises near the border with Ukraine ended, easing geopolitical risk.

Russian President Vladimir Putin ordered his troops back to bases from the western part of Russia after the drills finished as scheduled, Interfax reported today. Russian soldiers are still deployed in Ukraine’s Crimea region as U.S. Secretary of State John Kerry is set to arrive in the capital Kiev amid the worst political standoff since the Cold War.

“It’s generally a bit of relief trades coming through,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “Risk aversion is down as it appears that Moscow and Ukraine have pulled back from the brink of a head-on confrontation at this moment.”

Five-year credit-default swaps declined six basis points, or 0.06 percentage point, to 99 as of 5:24 p.m. in Kuala Lumpur, according to data provider CMA. That’s the lowest level since Dec. 19. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

A report this week may show Malaysia’s exports climbed for a seventh month in January, while the central bank will keep its benchmark interest rate at 3 percent at its review, according to Bloomberg surveys.

Exports Data

The ringgit strengthened 0.2 percent to 3.2750 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.2687, the strongest level since Feb. 26. The currency was trading little changed before the Interfax report.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 10 basis points, or 0.10 percentage point, to 7.03 percent.

Malaysia’s overseas shipments rose 7.9 percent in January from a year earlier, after gaining 14.4 percent in December, according to the median estimate of economists surveyed before data due March 7. All 23 economists in a separate survey see the central bank holding rates on March 6.

The yield on the 4.181 percent sovereign notes due July 2024 was little changed at 4.12 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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