Full coverage of Russia's invasion of Ukraine, from The Wall Street Journal
The Russian state is set to fail to pay foreign bondholders a coupon due on a bond for the first time since 1998.
“They clearly see this as an economic war, and this is their way of striking out at foreigners,” said Paul McNamara, an emerging-market bond fund manager at GAM. “If you’re a foreign bondholder holding Russian domestic government debt, ultimately you might not be able to do much. You can try to enforce the terms of the bonds, but I suspect in practice that will be difficult,” said Jamie Durham, a partner with a focus on debt capital markets at law firm Allen & Overy.
Most of Russia’s local-currency bonds are held domestically and these bondholders can still be paid their coupons. Foreign ownership of Russia’s local-currency bond market was below 20% in February, according to data from Russia’s central bank. Their holdings were valued at nearly 3 trillion rubles at the end of January, according to the Institute of International Finance. That’s around $25 billion at Thursday’s exchange rate.
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