Money and Markets

Russian debt default odds jump to 90% after a report said the US will block bond payments

Business Insider US
Central Bank of Russia. Hank5/Getty Images
Central Bank of Russia. Hank5/Getty Images
  • A spike in the cost of insurance on Russian debt implied a 90% probability on Wednesday the Kremlin will miss bond payments within a year.
  • That's up from 77% on Tuesday, according to ICE Data Services.
  • The jump follows a report that the Biden administration will block bond payments from Russia to US investors.
  • For more stories go to www.BusinessInsider.co.za.

A spike in the cost of insurance on Russian debt implied a 90% probability on Wednesday the Kremlin will miss bond payments within a year.

That's up from 77% on Tuesday, Bloomberg reported, citing ICE Data Services, which tracks insurance on debt meant to protect investors.

The surge comes as investors contemplate the likelihood of the Biden administration blocking bond payments from Russia to US holders, putting Moscow closer to its first sovereign debt default in nearly 100 years.

The increased default risk is tied to a sanctions waiver from the US Treasury Department's Office of Foreign Asset Control that has thus far allowed the Kremlin to pay off dollar-debt obligations.

But on Tuesday, sources told Bloomberg that the Treasury Department is expected to let the waiver lapse once it expires on May 25.

The Kremlin has struggled to navigate payment channels essentially blocked by Western sanctions, making it difficult for money to reach bond holders.

Still, Russia has until now been able to use US banks as key conduits for delivering sovereign bond payments, although the country nearly missed a deadline earlier this month

But an end to the Treasury Department's waiver next week would come just before the Kremlin's next payment is due on May 27 for bonds that mature in 2026 and 2036.

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