june 28, 2022 - Russia default

Forced sovereign debt defaults

The US Treasury might have made a mistake in its eagerness to trigger a Russian default

As a result of a decision announced by the US Treasury on May 24, the Russian Federation finds itself in this third category.

The general rule is that the party claiming the defence cannot itself have been the cause of the difficulty.

In this case, is the inability to pay the bonds a result of the sanctions or is it rather a result of Russia’s illegal invasion that caused the sanctions?

• grace period expired for two bonds - june 26

https://www.bloomberg.com/news/articles/2022-06-26/russia-defaults-on-foreign-debt-for-first-time-since-1918#xj4y7vzkg
https://uk.investing.com/news/economy/a-default-when-flush-with-cash-five-signs-russia-aint-sinking-yet-2676244

• legal

https://www.kirkland.com/-/media/publications/alert/2022/04/kirkland-alert--spotlight-on-russia-credit-default.pdf?la=en

sovereign immunity

• https://www.creditslips.org/creditslips/2022/03/are-russian-sovereign-bonds-now-worthless.html

CDS auction

• https://www.risk.net/derivatives/7950281/cds-market-mulls-settlement-options-for-russia-contracts

• https://www.msci.com/www/blog-posts/sanctions-bring-a-new-form-of/03149633711

Alternatively, holders of the CDS may need to rely on the outcomes of dealer polls. This could result in multiple recovery rates and lead to losses for market makers or investors who thought they were hedged with offsetting positions