Morgan Stanley warns Russia could default in the next few weeks

 Morgan Stanley warns Russia could default in the next few weeks

According to Newsweek, Simon Waver, head of foreign credit strategy in emerging markets at Morgan Stanley, wrote: “We consider default as the most likely scenario” for Russia.

The Russian economy is struggling because of tough Western sanctions, many of which target the financial sector. Several Russian banks have been cut off from the SWIFT international payment system and the ruble is in free fall.

Morgan Stanley warns Russia could default in a few weeks - Photo 1.

Default occurs when the government is unable to pay its debts. According to experts' predictions, Russia will probably default on April 15. This is the end of the 30-day grace period on Russian government bond yields maturing in 2023 and 2043. Defaults often make future re-borrowing significantly more difficult and expensive.

Mr. Waever added: “In the event of Russia default, the situation will not be the same as usual. Venezuela is perhaps the most relevant comparison.”

The South American country and state-owned oil company Petroleos de Venezuela SA, defaulted on $60 billion in debt in 2017, plunged the country into a severe crisis.

“The market is counting on a catastrophic, non-renewable default,” said Gabriel Sterne, head of global strategic services and emerging markets macro research at Oxford Economics. structure of the economy in the near future".

"The only buyer [of the bond] will be the Russian people, who can accept the interest payment in rubles. Unfortunately, if such buyers exist, they can make very well at this price. ", he said.

Mr. Sterne continued: "[Default] is a financial humiliation for Russia. Although the cause of default is because nobody wants or has the ability to hold government bonds, the government's ability to borrow money. or Russian companies will get closer and closer to zero."

According to Bloomberg, the Russian government has borrowed about 49 billion USD of bonds denominated in USD and EUR. Interest payments to some bondholders are due in the coming months.

"The risk of default is real," said George Catrambone, head of Americas trading at DWS Group. According to him, the Russian bond market is frozen and there are relatively few potential buyers.

Russia will pay foreign debt in rubles, international creditors will receive bitter fruit

President Putin signed a decree requiring Russia to pay foreign creditors in rubles. Currently, the ruble has fallen to a record low against the dollar.

Influence on China

Economist Stephen Roach, a senior fellow at Yale University, told CNBC that the impact of Russia's default on foreign debt would also have an impact on its key ally.

"China cannot afford to maintain close links with Russia" if Russia defaults on its debt, Roach said.

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