While economic sanctions against Russia continue, question marks remain regarding the coupon payment of the country's foreign currency bonds. While investors were still waiting for their payments, correspondent bank JPMorgan processed Russia's bond payments and sent the money to intermediary bank Citi for payment, according to sources familiar with the matter. According to one of the sources, JPMorgan sent the coupon payment to Citi after obtaining relevant approvals from the US authorities.
On Thursday, there was no signal that any payments were made from investors in Russian bonds. According to S&P Global Ratings, technical difficulties in the processes keep Russia's default risk alive, now or in the future. Following Fitch, S&P also stated that it would consider a payment made in a different currency as a default.
The fact that the payment from the correspondent bank went to Citi shows that there is no technical default for now. On the other hand, it should be noted that the system allows closing of transactions before February 24, despite bans like Swift. This will not be possible for new borrowings. It is technically sufficient for a Russian default that some payments are not transferred to the accounts, that is, they are not accepted and processed by the receiving bank. If the coupon payment is not accepted by the correspondent bank for bonds where the payment in rubles is not optional since the foreign exchange resources of the Central Bank of Russia or the National Wealth Fund have become very limited due to the sanctions, Russia will be in default within 1 month.
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