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Russian Default Angst Lingers Despite Ruble Bond Coupon Payment

  • Russia paid a coupon due on ruble bonds on Wednesday, but it’s not clear how foreigners will be able to access the cash after the central bank banned transfers to foreign investors.
  • Investors are still scrambling to understand whether or not the bonds could be in default even after the 11 billion ruble ($98 million) payment that was widely expected.
  • The Bank of Russia has introduced capital controls to in a bid avert a ruble collapse after its foreign reserves were frozen by international governments in response to Russia’s invasion of Ukraine.
  • The restrictions could leave foreign investors who held almost 3 trillion rubles ($29 billion) in the so-called OFZ debt at the start of February unable to collect income on their holdings -- raising the spectre of the nation’s first debt default since 1998.
  • "Unless it reaches all holders, they can’t deny default,” Paul McNamara, a portfolio manager at GAM Investments.
  • “This will likely be a technical default, we’ll see how long it goes on for,” said Nick Eisinger, co-head of emerging-markets active fixed income at Vanguard Asset Management in London. “We also see strong likelihood of technical default on Eurobonds at the sovereign level.”
  • Moody’s: “A potentially weaker willingness on the part of the Russian government to service its debt on time and in full, raise the probability of more severe credit outcomes for foreign holders of Russian debt securities,”
MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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