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Russia Warns of Historic Default

Ironically, before they invaded Ukraine, with its low debt levels and vast energy exports, Russia was considered one of the most creditworthy countries in the world. That’s why US sanctions designed to cut off Russia from the world’s financial systems have sent their markets into a free-fall.

The question is; will Moscow pay their debts? Investors are looking for interest payments on two of Russia’s bonds. The grace period of a month is fast approaching and should Russia miss the deadline, they will be in default.

Russia’s finance ministry said the payments will be made, but alluded to the sanctions making the payments extremely difficult. Russia has not been in default since 1998, but the markets are already preparing for the worst. Russia’s foreign bonds are trading at about 20% per cent of face value; not a good sign for Russia or investors.

Written by Chip Franklin

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