Russian government bond prices plunge to 7 cents… Actual transaction price of 5 cents Venezuela and Argentina, which suffered defaults, were at their lowest levels at the time The first hurdle of default on the 16th… If it becomes a reality, it is difficult to recover the investment I dont know how long the sanctions will last… Think No Bonds [Edaily Correspondent Bang Seong-hoon] With the possibility of Russias default (default) rising, it is predicted that it will take several years for Russia to re-enter the global financial market. Creditors who invested in Russian government bonds, etc., are advised that it would be better to think of the related bonds as pieces of paper, as it is unclear whether they will even recover their investment. Central Bank of Russia. (Photo = AFP) Russian government bonds fell below 10 cents per dollar last week, according to the Wall Street Journal (WSJ) on the 15th (local time). Russian government bonds maturing in 2026 were trading at 108 cents per dollar up until the beginning of this year, but began to plummet after the invasion of Ukraine on the 24th of last month and fell to 7.125 cents on the 9th of this month. Currently, the price is set at the same level. The valuation is similar to the Venezuelan government bond, which fell into default five years ago after the famine collapsed, and is close to the lowest level of the Argentine government bond, which has declared defaults several times, the WSJ explained. Russias dollar-denominated government bonds cost around 8 cents per dollar, according to data from the financial intelligence firm Advantage, but the actual transaction price is only 5 cents per dollar, fund managers said. The price is lower than the 6 cent level of Argentine government bonds during the global financial crisis in 2009. This is because no one is willing to buy Russian government bonds due to sanctions from the West, including the US and Europe. Even hedge funds and so-called vulture funds, which make profits by investing in non-performing companies or non-performing loans, have withdrawn from investment in Russian government bonds or significantly reduced their related activities after Western sanctions. Typically, these hedge funds collect bonds by negotiating payments or forcing them through lawsuits when the investment country tries to re-enter the international bond market. However, even after the war in Ukraine is over, it is unclear how long the Western sanctions will last, so it is unclear when Russia will return. Russia faces its first hurdle on the 16th. It has to pay $117 million in interest on the dollar-denominated bonds. If the 30-day grace period expires without repayment, it leads to an official default declaration. Given the case of Argentina in the past, it is unknown whether or how long it will take to repay the money borrowed by creditors if Russia defaults. In the case of Argentina, which declared default several times, lawsuits with hedge funds and other companies continued for over 10 years, and it took 15 years to pay off debts. In addition, if creditors try to negotiate a debt settlement, the US or Europe could block them. Russia may not appear at the negotiating table at all. The Russian governments sanctions to prevent the export of foreign currency abroad is also an obstacle to the return of investment. When Russia declared a moratorium in 1998, a hedge fund that had bought ruble-denominated government bonds for less than 10 cents a dollar had more than doubled the amount they exchanged for new ones, the WSJ reported. Jay Newman, a former portfolio manager at Elliott Management, who led the international litigation over the Argentine default, said: “Creditors will have a hard time seizing Russias foreign assets in a lawsuit.” It will be a much tougher fight.�� ��Even if we win an international lawsuit, it is very difficult to enforce it against a country like Russia,�� he added. (Source = WSJ website capture)
