Russia default ıssue


Coupon payment… The crisis in Russia’s dollar-denominated bond payments is over for now. The Russian Ministry of Finance reported that a payment of 117.2 million dollars reached the London branch of Citibank, which mediated the coupon payment. The Ministry stated that Russia has fulfilled its obligations regarding Eurobonds.


What does the Russian default mean? Russian government bonds have cross-default provisions, meaning that if a bond is defaulted, it can be deemed to have defaulted on all of its outstanding obligations. But when a country defaults, lenders have no international court to go to.


While not common, countries can and do default on government debt periodically. This happens when the government is unable or unwilling to deliver on its financial promises to repay bondholders. Argentina, Russia and Lebanon are just a few of the governments that have defaulted in the past decade.


Friday’s Russian CDS dropped the probability of bankruptcy from 60% to 48%. CDS is at 1500 points.. In the period after the 1998 Russian crisis, the highest thresholds are the 2008 financial crisis, where it rose to levels close to 800, and the 2014 Ukraine crisis, where it was over 400.


The historical course of the Russian CDS… Source: Bloomberg


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