Markets worried about Russian debt default

Today is the start of what is likely a long Russian debt battle, with $117 million in interest payments due on government dollar-denominated bonds. If Russia fails to make the payments, it could be its first foreign debt default since the Bolshevik Revolution of 1917. The Times’ Eshe Nelson, DealBook’s Alan Rappeport and Lauren Hirsch looked at what is game – and what might happen next.

The situation: The Russian government owes about $40 billion in bonds denominated in dollars and euros. Half of this debt is held by foreign investors. Russian government bonds were considered investment bonds until a few weeks ago and were included in indices used to compare other funds.

The big question: Will Russia pay in dollars or rubles? Russia says sanctions that cut it off from the international financial system mean it can only pay in rubles, and that is an acceptable means of payment under the circumstances. Others disagree and say paying dollar-denominated bonds in rubles would constitute default. Either way, payments due today have a 30-day grace period, so a default wouldn’t technically occur until mid-April.

How detrimental would the defect be? Regulators say a Russian default does not pose systemic risk, due to limited exposure to the country’s assets, which many investors reduced after the annexation of Crimea in 2014. Moreover, investors have already taken the financial hit: Russian bonds are trading at a fraction of face value. There were also forced sales of bonds after the assets were expelled from indexes. There is always the risk that there will be “some actor that no one has noticed who is suddenly in distress,” said Paul Cadario, a former World Bank official, with uncertain consequences for the financial system in the sense large.

What happens next? It is unclear what will happen to investors who bought credit default swaps on Russian debt, as it is uncertain whether Russia will be declared in default if it pays in rubles. And the quirks of Russian bond contracts mean bondholders have limited ability to sue in the event of default. “That doesn’t mean creditors can’t sue Russia and get judgment,” said Jay Newman, who helped lead Argentina’s 15-year legal battle over overdue debt. at Elliott Management, “but it’s going to be a long, hard job, and nobody knows what the rules are.

The Last of the Russian-Ukrainian War:

Chinese stocks soar after Beijing promised to stabilize markets. Stocks rallied after government officials vowed to support stock markets and end a crackdown on tech companies. Shares had fallen amid concerns over backlash in Beijing over its ties to Moscow and new pandemic lockdowns in tech hubs like Shenzhen.

Oil falls below $100 a barrel. The fall mirrored those pandemic lockdowns in China. Coal prices surged, however, as buyers expected Russia to suspend exports in retaliation for sanctions. Meanwhile, Saudi Arabia is reportedly considering pricing some of its oil sales in renminbistrengthening the position of the Chinese currency.

Air travel is rebounding to pre-pandemic levels. U.S. travelers spent an estimated $6.6 billion on domestic flights last month, up 6% from February 2019. Airlines reported an increase in daily ticket sales, but fear headwinds from rising fuel prices.

Pfizer and BioNTech are seeking US approval for a second booster shot. Drugmakers argue that another dose would help protect people aged 65 and over from coronavirus infection, not just hospitalization.

AMC took a stake in a gold mine. Yes really. The movie theater chain rocked the markets by acquiring 22% of Hycroft Miningwho had faced financial difficulties (and not currently operating). The deal has analysts baffled – Bloomberg’s Matt Levine wonders if AMC is becoming some kind of meme-stock investment banking.

The Federal Reserve is widely expected to raise interest rates today, by a quarter point, for the first time since it cut its benchmark rate to near zero at the start of the pandemic. While the increase is not a surprise, the market reaction might be. (In 2015, the first of a series of Fed rate hikes caused the stock market to swing wildly.)

The following is less certain: The futures market is predicting an almost equal chance of six, seven or eight quarter-point rate hikes this year, including the one expected today. (Since there are seven meetings on the schedule, the upper limit would imply a half-point increase at some point.) That path will be determined by the ability of Fed Chairman Jay Powell to produce a landing. smoothly, that is to say to tame the highs of inflation without plunging the economy into a recession.

  • Bank of America’s Ethan Harris said interest rates could end up being much higher than many people expect. When the Fed begins to tighten, markets “generally undervalue” rising interest rates, he wrote in a recent note to clients.

To learn more about the Fed’s rationale for raising rates and how it could affect the economy, see our overview. The Times economics team will also host a live briefing with reactions to the Fed’s decision, which will be announced at 2 p.m. ET.

—Sarah Bloom Raskin, in a letter to President Biden asking to withdraw his appointment as the Fed’s chief banking regulator. She lacked enough support to pass the Senate, with some Democrats joining all Republicans in to oppose his appointmentciting in part his statements on climate risk monitoring.

With more than three million people having fled Ukraine – and millions more likely to follow – the cost of resettling refugees is expected to run into the tens of billions of dollars, writes Patricia Cohen of The Times.

This will weigh heavily on the European countries hosting them, just as those countries recover from the pandemic and grapple with supply shortages and inflation. And the permanent integration of millions of people could reshape the continent’s economy.

Volodymyr Zelensky, President of Ukraine, will address Congress today to ask for more American support for his country as it fights the Russian invasion. The advocacy comes as lawmakers consider new legislation who would direct the money seized from the Russian oligarchs “for the benefit of the Ukrainian people”.

“Putin and his oligarchs funnel their dirty money into countries where the rule of law prevails by buying mansions, mega-yachts, works of art and other high-value assets,” said Senator Sheldon Whitehouse , Democrat of Rhode Island, in a report on the bill, which would go beyond freezing the assets of oligarchs on sanctions lists and allow for the confiscation and liquidation of assets over $2 million. “We need to grab these ill-gotten luxuries and put them to use.”

The new bill is a step after “KleptoCapture”. The Department of Justice recently announced the creation of an interagency group called KleptoCapture Working Group, dedicated to the application of economic sanctions against Russia, in particular by seizing assets. The law on the seizure of assets for the reconstruction of Ukraine, introduced by a bipartisan group of senators, would expand the power of the ministry to channel the proceeds of these confiscations towards reconstruction, humanitarian aid and weapons for the Ukraine. It would also allow the Treasury to reward tipsters.

What are his chances? When President Biden previewed Task Force KleptoCapture in his State of the Union address, he received applause from lawmakers on both sides of the aisle. There is also widespread support for increased aid programs for Ukraine. With Zelensky’s call ringing in the ears of lawmakers who have shown uncharacteristic unanimity lately, Senate legislation (an updated version of a bipartisan bill) could move quickly through Congress but slow when ‘she will reach the White House, which has moved more carefully as legislators on certain issues related to Ukraine.

Timing is everything: The oligarchs can circumvent the law no matter how quickly the authorities go. UK officials are being criticized for processes that some say allow people at risk to move assets before sanctions hit.


  • Trafigura, a giant commodities trader, has sought billions from private equity firms to stabilize its finances amid a rocky market backdrop. (Bloomberg)

  • Masa Son, the founder of SoftBank, has pledged up to 33% of his stake in the tech giant in return for loans as the company’s shares have fallen. (Bloomberg)

  • EU antitrust regulators have approved Amazon’s $8.5 billion takeover of MGM. (Reuters)

  • Current and former employees of BuzzFeed have accused the digital media publisher of illegally denying them the opportunity to sell their shares at a higher price after its market debut. (NYT)

  • Top M.&A. counselors return to New Orleans tomorrow for the Tulane Corporate Law Institute, which is in person and online; the registration deadline is today. (Institute of Company Law)


  • The SEC would again investigate the Big Four accounting firms for possible conflicts of interest. (WSJ)

  • The National Labor Relations Board has filed a lawsuit against Starbucks over allegations that the company retaliated against two labor organizers in Arizona. (NYT)

  • The Senate has passed a bill to permanently move the United States to daylight saving time. (NYT)

The best of the rest

  • Intel plans to spend at least $19 billion to build two factories in Germany. (NYT)

  • Another ship belonging to Evergreen ran aground, this time in the Chesapeake Bay, a year after the Ever Given blocked the Suez Canal for weeks. (NYT)

  • “Behind Entenmann’s cellophane, a slice of Long Island life” (NYT)

  • Nature restoration is becoming the selling point of property developers. (NYT)

  • The latest subject of study at New York University: Taylor Swift. (WSJ)

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