Market Overview

Activity Increases In Leveraged Russia ETF Ahead Of Upgrade

Activity Increases In Leveraged Russia ETF Ahead Of Upgrade

Traders increased their interest in the Direxion Daily Russia Bull 3X Shares (NYSE: RUSL) ahead of a major ratings agency upping its rating on Russia's sovereign debt.

Last week, Standard & Poor's boosted Russia's credit rating to BBB- from BB+, pushing Russia into investment-grade territory. It was the first time in 12 years S&P upgraded Russia. S&P along with rival Moody's Investors Service carried junk ratings on Russia since 2015, according to Bloomberg.

The upgrade reflects the track record of prudent policy response that has allowed the Russian economy to adjust to lower commodity prices and international sanctions,” said S&P in a statement.

Rising Volume

RUSL tries to deliver triple the daily returns of the MVIS Russia Index. That index is designed “to represent the overall performance of publically traded companies that are domiciled and primarily listed on an exchange in Russia or that are not Russian companies, but nonetheless generate at least 50% of their revenues in Russia,” according to Direxion.

On Monday, RUSL surged on volume, bringing its gain over the past week to over 10 percent. Entering Monday, RUSL was the second-best performer among Direxion's leveraged bullish exchange traded funds (ETFs) on a month-to-date basis.

Indicating that some traders possibly timed the S&P Russia upgrade correctly, volume in Russia was more than 35 percent above its trailing 20-day average for the five days ended Feb. 23, according to Direxion data.

Decreasing Debt

Russia's easing debt burden could serve as an additional catalyst for the country's equity and fixed income markets.

The fall in Russian regional debt in 2017 confirms the sector's improved fiscal performance, although this continues to vary across regions,” Fitch Ratings says. “Our baseline scenario assumes further fiscal consolidation, but this is not certain. The recent improvement in the regions' budgetary performance reflects cost cutting, revenue growth and, notably, a rebound in corporate income tax driven by Russia's economic recovery.”

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