Economic cost of The Assault of Russia on Ukraine was totally exposed on Wednesday as Vladimir Putin’s sanctions are ravaged government staggering on the edge of son first international debt by default since the Bolshevik Revolution.
Moscow had to pay 117 millions of dollars in interest on of them dollar- denominated sovereign bonds that he had sold back in 2013. But the limits he now faces in making payments, and the Kremlin talk he might pay in rubles – triggering a default anyway – even meant veteran investors were left guess what might happen.
One described it as the most guarded government debt payment since Greece’s default at the height of of the eurozone crisis. Others spoke of an emergency “grace period” that allows Russia still has 30 days to make payment could drag the saga out.
“The thing about defaults is that they are never clear cut and this is no exception,” Pictet said emerging market wallet manager Guido Chamoro.
“There’s a grace period, so we’re not really going know whether it is a default or not until April 15,” he said referring to the situation if no coupon payment is made. “Everything can happen in grace period.”
A Russian government debt default was unthinkable until Putin called it a “special military transaction” in Ukraine started in end of February.
He had almost 650 billion dollars of foreign exchange reserves, coveted investment grade credit ratings with S&P Global, Moody’s and Fitch, and raked in hundreds of millions of dollars a day selling son oil and son gas at skyrocketing prices.
Then the tanks rolled in and the United States, Europe and their Western allies fired back with unprecedented sanctions, which froze two-thirds of Russia’s reservations she shot out took place overseas.
“I think the market now expects Russia not to make the (mandatory) payments”, head of emerging market debt at Aegon Asset Management Jeff Grills, adding that the conflict was one of the few emerging market events able of really disturbing global markets.
This is because Russia role like one of The world’s leading commodity producers sent prices and global inflation skyward.
At the same time he has left Russia a virtual Pariah state, paralyzed by sanctions and surveilling hundreds of The world’s biggest companies are now leaving the country after deciding their presence is no longer possible.
Default scenarios
As for Russia is beaten government bonds, most are now changing hands at just 10%-20% of their face assess.
The two installments on Wednesdays are first of many, with 615 millions additional dollars due over the rest of March, and the first “main” – final full Payment of a link – on April 4 worth $2 billion alone.
Experienced investors see three potential scenarios for how Wednesday’s crucial deadline plays out.
the first is that Moscow pays in full and in dollars, which means default worries disappear for the moment.
Major Russian energy providers Gazprom and Rosneft have both made Payments on international obligations over the last 10 days so there is still a shine of I hope it can be done if Moscow thinks it is in his interests.
the second possibility is that Moscow does not pay, beginning the countdown of the 30-day grace period to default.
A third option where Russia pays but in rubles is also possiblealthough the law terms of obligations would mean that it always amounts to default. 30 day grace rule would still apply.
“Maybe we will know today (if they pay) but maybe we won’t,” Pictet’s Chamorro said. His firm doesn’t own the bonds, but does own other Russian bonds – and when a country defaults on one of its bonds, it tends to mean all of its bonds “cross default”.
“In circumstances like these, it is safer to expect the unexpected. You can’t really rule nothing out.”
Economic cost of The Assault of Russia on Ukraine was totally exposed on Wednesday as Vladimir Putin’s sanctions are ravaged government staggering on the edge of son first international debt by default since the Bolshevik Revolution.
Moscow had to pay 117 millions of dollars in interest on of them dollar- denominated sovereign bonds that he had sold back in 2013. But the limits he now faces in making payments, and the Kremlin talk he might pay in rubles – triggering a default anyway – even meant veteran investors were left guess what might happen.
One described it as the most guarded government debt payment since Greece’s default at the height of of the eurozone crisis. Others spoke of an emergency “grace period” that allows Russia still has 30 days to make payment could drag the saga out.
“The thing about defaults is that they are never clear cut and this is no exception,” Pictet said emerging market wallet manager Guido Chamoro.
“There’s a grace period, so we’re not really going know whether it is a default or not until April 15,” he said referring to the situation if no coupon payment is made. “Everything can happen in grace period.”
A Russian government debt default was unthinkable until Putin called it a “special military transaction” in Ukraine started in end of February.
He had almost 650 billion dollars of foreign exchange reserves, coveted investment grade credit ratings with S&P Global, Moody’s and Fitch, and raked in hundreds of millions of dollars a day selling son oil and son gas at skyrocketing prices.
Then the tanks rolled in and the United States, Europe and their Western allies fired back with unprecedented sanctions, which froze two-thirds of Russia’s reservations she shot out took place overseas.
“I think the market now expects Russia not to make the (mandatory) payments”, head of emerging market debt at Aegon Asset Management Jeff Grills, adding that the conflict was one of the few emerging market events able of really disturbing global markets.
This is because Russia role like one of The world’s leading commodity producers sent prices and global inflation skyward.
At the same time he has left Russia a virtual Pariah state, paralyzed by sanctions and surveilling hundreds of The world’s biggest companies are now leaving the country after deciding their presence is no longer possible.
Default scenarios
As for Russia is beaten government bonds, most are now changing hands at just 10%-20% of their face assess.
The two installments on Wednesdays are first of many, with 615 millions additional dollars due over the rest of March, and the first “main” – final full Payment of a link – on April 4 worth $2 billion alone.
Experienced investors see three potential scenarios for how Wednesday’s crucial deadline plays out.
the first is that Moscow pays in full and in dollars, which means default worries disappear for the moment.
Major Russian energy providers Gazprom and Rosneft have both made Payments on international obligations over the last 10 days so there is still a shine of I hope it can be done if Moscow thinks it is in his interests.
the second possibility is that Moscow does not pay, beginning the countdown of the 30-day grace period to default.
A third option where Russia pays but in rubles is also possiblealthough the law terms of obligations would mean that it always amounts to default. 30 day grace rule would still apply.
“Maybe we will know today (if they pay) but maybe we won’t,” Pictet’s Chamorro said. His firm doesn’t own the bonds, but does own other Russian bonds – and when a country defaults on one of its bonds, it tends to mean all of its bonds “cross default”.
“In circumstances like these, it is safer to expect the unexpected. You can’t really rule nothing out.”