% return in C$
Canada: MSCI Canada; U.S.: MSCI USA; International markets: MSCI EAFE; Emerging markets: MSCI Emerging Markets. Source: Morningstar Direct
Fixed income and currency
% return in C$
Canada investment grade: Bloomberg Barclays Canada Aggregate; Global investment grade: Bloomberg Barclays Global Aggregate; U.S. high yield: Bloomberg Barclays U.S. High Yield. Source: Morningstar Direct.
The SWIFT network, and the implications for Russia
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) was founded in 1973, and is a cooperative headquartered in Belgium. Over 11K financial institutions in over 200 countries are connected to the global payment communications system that transfers information about financial transactions between counterparties. SWIFT does not transfer the actual funds, but merely transfers information (for example Bank ID number) about the origin and destination of those funds. It is core to cross-border payments, and used in areas such as trade, foreign investment, and remittances.
As a result of the Russian invasion, certain regions (including Canada, the U.S., and the E.U.) announced that sanctioned Russian banks (such as VTB Bank and Bank Rossiya) will be cut off from SWIFT. A consequence is that it becomes harder for Russia to deal in export/import commerce and hinders the flow of capital in and out of the country. Russian exports account for nearly 40% of the E.U.’s natural gas supply, and payments for this will be disrupted. These sanctions also choke foreign exports into Russia. The restrictions on imports and exports payments can cause a major balance of payments (BoP) crisis, which would lead to an inevitable further devaluation of the Russian ruble and, consequently, higher local inflation. The purpose of the global sanctions, such as removing Russian bank access to SWIFT and other measures restricting access to global capital markets, is to stop the invasion as quickly as possible by reducing Russia’s ability to fund its military operations.
SWIFT traffic heavily concentrated within Europe, Middle East, and Africa region
Source: Wall Street Journal, February 26, 2022.