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
Conclusion? Global sanctions against Russia continue. In the weeks since the start of the war, the energy-rich country has become the most sanctioned country in the world and has seen its credit rating dwindle with expectations of default. Five bondholders in Europe say they haven't received their coupon payments. It is difficult to foresee how this uncertainty will be overcome due to global sanctions. It seems impossible to make optimistic predictions. If defaulted, Russia has a 30-day grace period from Thursday to meet its payment obligations. Russia says that if dollar coupon payments are blocked, it will do them in rubles.
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