Coupon payment… Russia said in a statement that they made coupon payments, there is still technical uncertainty regarding this issue. According to the Russian Ministry of Finance, the dollar payment has been initiated and the relevant financial institutions said they are processing these payments. However, the fact that Russia's creditors have not yet received payments may be an indication that sanctions are preventing Russia from repaying its dollar-denominated obligations.
1997 Asian crisis and 1998 Russian crisis… Russia's local currency default in 1998, expanded to include hedge funds and wealth management companies, went unnoticed by the wider financial markets and regulators, and had a major impact on financial markets.
Asian countries had indexed their currencies to the dollar in order to benefit from capital flows in the world. The countries in the region, which generally followed an export-oriented policy, recorded high growth until 1997. Even though the fixed exchange rate continued for a certain period of time, the Fed's interest rate hike upset all plans, and Asian countries, whose dollar-denominated currencies gained value, lost their competitiveness. This situation deeply affected Asian countries in need of hot money and started to have a current account deficit.
This situation created a domino effect and deeply affected Russia and Brazil. Corruption and inefficient resources caused a deep financial crisis. After the 1997 Asian crisis, the eruption of the 1998 Russian crisis caused the risk appetite to decrease and the stock markets were sold. This situation caused small investors to turn to bonds rather than stock market. hedge fund. Long Term Capital Management was generally a leveraged bond position company. As a result of the sequence of events, all of LTCM's positions exploded. Thinking that this situation could cause deep damage to the banking sector, the Fed agreed with about 15-16 companies and saved the company.
Russian government Eurobonds… Marked in yellow above, these are bonds with coupon payments last week and allegedly paid by the Russian government. Those marked in yellow at the bottom are Eurobonds with coupon payments appearing in the next two weeks, two of which will also include the principal payment... Source: Bloomberg
Conclusion? According to the Russian authorities, debts will be repaid in rubles if dollar payments are not allowed. However, rating agencies argue that ruble payments would constitute a default and Russia would enter a 30-day grace period. As you can see, Russia's process of repaying its bond obligations under sanctions is complex. Time will tell whether Russia can avoid default and what the extent of the impact will be. For now, we will continue to monitor the payback situation and how sanctions play a role in Russia's ability to meet its obligations.
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