International Business: Investors still wary of Russia default after bond payment – Gulf Digital News

International Business: Investors still wary of Russia default after bond payment – Gulf Digital News

London: Russia narrowly avoided a debt default last week, but markets are still priced like it’s on the brink.

Bonds are stuck at distressed levels and five-year credit default swaps put an 87 per cent chance of a default. Those odds are lower than in April, but still elevated.

The trend of international governments toward tougher sanctions and more widespread restrictions is keeping investors in the dark about the likelihood of them getting their hands on the future payments they’re owed. Even if Moscow keeps pushing to get money through the labyrinth of rules, success is far from guaranteed.

“Russia will likely default eventually,” said Elena Daly, founder of EM Conseil, a Paris-based advisory firm specializing in sovereign debt management. “In 2008-09 we saw how quickly forex reserves could melt. It is not just the upcoming debt service payments, Russia also needs to fund the war machine and vital imports.”

The existing measures imposed against Russia after its invasion of Ukraine have already severely complicated payments, hindering and blocking the movement of money.

Creditors are looking to a crucial loophole that’s allowed investors to keep receiving bond payments. The exemption -- General License 9A, issued by the U.S. Office of Foreign Asset Control -- is