Russian government bond prices fell more than 50% on Monday as foreign investors worried that Western sanctions would undermine the country’s ability and willingness to repay them.
Russia’s 5.25% of dollar-denominated bonds due in 2047 were quoted at about 30 cents on the dollar, down from 70 on the previous trading day and about 100 before Russia invaded Ukraine, according to Advantage. Data Inc. April fell to about 50 cents on the dollar from 95.50 at the end of last week.
Actions by US and European governments to cut off Russia’s access to the international banking network Swift could prevent the country from distributing payments to bondholders abroad, bond fund managers in emerging markets said.
Bond trustees and clearing agents sitting between bond issuers and their lenders may also refuse to transfer such payments for fear of facing sanctions, they said.
Even if Russia finds a way to pay foreign bondholders, it may choose not to retaliate for sanctions imposed by Western countries and their military support for Ukraine, fund managers said.
The economic consequences of the war in Ukraine could also increase the rate of default on corporate bonds across Europe, which has been declining since early 2021, according to S&P Global Ratings. Ongoing geopolitical tensions, especially over the Ukraine-Russia conflict, could have an impact, a credit rating company said Monday.
The price of the 4.95% bond of the Russian energy company Gazprom, due in 2028, fell to 45 cents against the dollar on Monday from about 92 cents a week ago, according to MarketAxess. The bonds of the oil company Lukoil PJSC of 3.875% maturing in 2030 fell to 40 cents from 87 cents over the same period.