Dangers of a ‘Pulp Fiction’ Moment in Ukraine

Dangers of a ‘Pulp Fiction’ Moment in Ukraine

International and Arab News

One of the best moments in “Pulp Fiction” comes when Samuel L. Jackson is questioning a hapless victim and breaks off to shoot someone else in the head. “Oh I'm sorry, did I break your concentration?” he says.

In the same way, it’s very easy for what now looks like the possible imminent invasion of Ukraine to break everyone’s concentration. There are very good reasons why it should. Many established certainties of the world order would be scrambled by such an event, while in markets it is reasonable to assume that such a shocking incident would lead to lower bond yields once more, and higher oil prices.

So, to guard against the risk that we’re all about to have our concentration broken by a Tarantino-esque shock in Ukraine, here are a few of the issues that are already easy to miss amid what have been a dramatic few weeks on capital markets.

First, it's always important to keep an eye on the credit market. Higher rates would logically lead to some kind of problem with solvency, and so it’s encouraging that to date the spreads of high-yield bonds compared to Treasuries remain historically low, even though they’re back up to