Russia may be insolvent
The Central Bank of the Russian Federation has banned the payment of coupons on bonds to foreign holders of these securities.
Such a move is expected to strengthen the Russian financial system in the face of sanctions imposed on the country. As a result, holders of Russian coupon bonds worth a total of $29 billion will not receive interest. The payment was scheduled for March 2.
Nick Eisinger, one of the directors for acitve fixed income emerging markets at Vanguard Asset Managment, says Russia is likely to be technically insolvent. He also sees a high probability of technical insolvency for sovereign Eurobonds.
The Russian government’s reduced willingness to regulate debt service could end badly for foreign holders of Russian debt securities. This is the view of Moody’s Investor Service.