Sovereign Russian Bonds on the Brink of Historic Default, Economic Costs of War Weighs Higher

Russia faces yet another setback as an economic cost of its invasion in Ukraine, Moscow is now due to pay $117 million on two-dollar denominated offshore bonds it had sold back in 2013.

Its sovereign debt would be in default as the country plans to pay in rubles leading to veteran investors left guess what might eventually happen.

Many are now comparing the case to Greece’s sovereign default back in the days of Euro Zone Crisis. Some are speculation emergency ‘grace period’ that allows Russia another 30 days to make the payment could drag the saga out.

“The thing about defaults is that they are never clear cut and this is no exception,” said Pictet emerging market portfolio manager Guido Chamorro, as reported by Reuters.

“There is a grace period, so we are not really going to know whether this is a default or not until April 15,” he said referring to the situation if no coupon payment is made.

“Anything could happen in the grace period.”

“I think the market now expects Russia not to make the (bond) payments,” the head of emerging market debt at Aegon Asset Management Jeff Grills, adding the conflict was one of the few emerging market events capable of really unsettling global markets.

Russian battered government bonds are now trading at just 10%-20% of their face value. The two coupon payment due on Wednesday are first of several payments in the future, another $615 million is due over the rest of March. It has its first principal payment of a bond due on April 4 worth $2 billion alone.