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Bonds outstanding and what could happen –

Russia within hours of default. Ends Sunday evening atThe grace period“(It lasted a month) for non-payment of interest on coupons and bonds in dollars and euros due in May and not paid by Moscow, due to sanctions imposed by the United States and Europe. On Monday morning, except for (unlikely) last-minute payments, Russia will therefore be in “technically” default, that is, defaulting on creditors.

This is the first time since 1998. Then the financial crisis caused a significant depreciation of the ruble, forcing Moscow to stop paying its government bonds. This time it’s different. Moscow has the resources to meet the interest payments, but it cannot do so because Europe and the United States cut Russia off from the circuit of international payments after the February 24 invasion of Ukraine and made its assets “unapproachable” to investors. After Moscow was expelled from the financial systems that spin the wheels of credit and global trade, a default would seal its pariah status.

That is why, by affecting Russia’s reputation and image, default is a slap in the face to President Vladimir Putin’s pride and prestige. It also affects the credibility of Elvira Nabiullina, the central bank governor, who has captivated international investors with her credentials as a serious and well-trained economist and her promises to modernize Russian finance while ensuring its reliability.

Bonds worth 40 billion dollars

The default on creditors was caused by $100 million (in interest) on two bonds, one in dollars and one in euros, maturing in 2026 and 2036. On May 27, Russia had to pay interest on the bonds for 71,25 million. and 26.5 million euros ($28 million). But a 30-day “grace period” was granted, ending precisely on the night of June 26.

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Moscow has about $40 billion in foreign bonds outstanding and should make about $2 billion in payments due by the end of the year. Figures that can easily be managed thanks to the proceeds of billions of dollars from the sale of oil and gas. As for the sanctions imposed by Western countries in response to the invasion of Ukraine, the Kremlin has repeatedly stated that there are no compelling reasons for technical failure on the part of Russia, because the state is unable to send foreign currency funds to Bondholders due to sanctions, and thus accused the West of trying to push it into “artificial” defaults.

default “avatar”

Russia’s Finance Ministry said it had made payments to the National Settlement Depository (NSD) in euros and dollars, adding that it had fulfilled its contractual obligations. However, due to the sanctions, the funds are unlikely to reach many international holders. For many bondholders, failure to receive the money owed on their accounts in a timely manner constitutes a default that leads to default and the inability to access additional funds from abroad before resolving the outstanding debt.

US blockade

The country’s efforts to avoid default ran into a major snag when the US Treasury’s Office of Foreign Assets Control (Ofac) effectively prevented Moscow from making payments in late May. “Since March, we thought that a Russian default might have been inevitable, and the question was only when,” he told the newspaper. Reuters Dennis Hranitsky, head of sovereign litigation at Quinn Emanuel Law Firm. The default is almost upon us.

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Earl Warner

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