STOCK MARKET SNAPSHOT FOR 15/3/2022
A default on Russia’s sovereign debt would add further pain to Russia’s economy and financial system, making it harder for Moscow to find new lending sources and raising future borrowing costs, a U.S. Treasury official said on Monday.
The official told Reuters the Treasury believes there are limited direct exposures in the U.S. financial system to Russian sovereign bonds and the main impact would fall on a Russian economy already reeling under the weight of Western sanctions.
Russia, which is pursuing an increasingly destructive invasion of Ukraine, has $117 million in payments due on Wednesday on two dollar-denominated eurobonds. Its finance ministry has said it will make the payments in roubles if sanctions prevent it from paying in dollars – a move markets would view as a default.
Deputy U.S. Treasury Secretary Wally Adeyemo earlier told CNBC that Russia’s choices in how it pays its debts will drain resources from President Vladimir Putin’s ability to continue the war in Ukraine.
The Russian eurobonds in question, maturing in 2023 and 2043 , traded at 20 cents on the dollar or lower on Monday. They are among the first to have scheduled payments after Russia was hit by sanctions over its invasion of Ukraine.
The U.S. Treasury official said the dramatic falls in the price of Russian sovereign bonds suggested a high probability of default.
“Investors are paying close attention to payments coming due soon and are preparing for alternative outcomes,” the official added.
Source: Reuters (Reporting by David Lawder Editing by Chris Reese and Lincoln Feast)