Russia Halts Bond Trading

( )- As its debt teeters on the verge of default, Russia has been compelled to halt bond sales due to “cosmic” borrowing rates for the remainder of the year.

Sanctions on the Kremlin have continued to hurt, with the Kremlin’s finance minister announcing severe measures this week.

The plans came after Western sanctions necessitated it to pay bondholders in roubles despite the payment being due in dollars, implying a 95% likelihood of default within a year.

Minister Anton Siluanov told the Russian newspaper Izvestia that they do not plan to go to the local or overseas markets this year. It wouldn’t make sense since the cost of borrowing would be “cosmic.”

The Russian economy has been thrown into disorder by widespread inflation due to international sanctions on the Kremlin and western firms refusing to pay in roubles.

Major businesses such as McDonald’s, Starbucks, Coca-Cola, and Heineken have all pulled out of Moscow in the face of mounting demand for others to do the same.

With a default seeming more imminent, Russia has threatened the west, but it is unclear what legal remedies are available if the worst-case situation occurs.

They will sue, according to Siluanov, since they have done all necessary procedures to guarantee that investors get paid.

The possibility of default has hung over Russia for weeks after sanctions were imposed in response to its invasion of Ukraine. Moscow’s leadership claims it has the finances to satisfy its debt commitments and has frequently blamed the restrictions for its inability to make bond payments. According to Siluanov, the US and others attempt to drive Russia into default.

Due to financial and economic constraints, the cost of insuring Russia’s government debt soared this week, indicating a 99 percent risk of default within a year.

Russia is also postponing bond auctions, according to Siluanov, due to exorbitant borrowing prices.

According to Todd Schubert, head of fixed income at Bank of Singapore, Russia’s fiscal situation before the start of the Ukrainian crisis was favorable due to low leverage and sizeable foreign exchange reserves.

It also receives large amounts of revenue due to its oil and gas exports, with the European Union paying around 1 billion euros per day for energy alone.

Schubert speculates that this offers the government the freedom to stay out of the public debt markets for the time being.

S&P downgraded Russia’s credit rating in the last review on Saturday before terminating coverage. Because of a European Union embargo, rating agencies are pulling out of Russia.

Fitch Ratings and Moody’s Investors Service have withdrawn ahead of the April 15 deadline.