US Treasury Secretary Yellen: "Legal Action if Default... Halt on Treasury Issuance This Year"

Goddess Insurance Statistics Show 99% Default Probability Within One Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Russia, facing a default crisis due to Western economic sanctions, announced that it will halt additional government bond issuance this year.

On the 10th (local time), according to Bloomberg News, Anton Siluanov, Russia's Finance Minister, stated in an interview with the pro-government Russian media outlet Izvestia that "due to excessive borrowing costs, we will not issue bonds for the remainder of this year."

He also expressed intentions to take legal action if the West declares Russia in default. Minister Siluanov claimed, "We have taken all necessary measures to ensure investors receive their payments," and added, "We will file lawsuits (in case of default)." Furthermore, he said, "We will present to the courts Russia's efforts to make payments in foreign currency or rubles," adding, "It will not be an easy process and there will be many difficulties, but we will actively prove it." However, he did not specify what kind of legal responses would be taken.

Since the beginning of this year, Russia has issued ruble-denominated government bonds worth 128 billion rubles (approximately 1.8483 trillion KRW), falling far short of the initial first-quarter target of 70 billion rubles.

Earlier, the U.S. Treasury Department had initially decided to apply exceptions for U.S. banks' foreign currency payment processing related to Russian public institution capital transactions until May 25, but due to the stalemate in the Ukraine situation, it strengthened pressure by suspending this exception from the 4th of this month. The principal and interest payments on Russian government foreign currency bonds maturing in March were paid in dollars under the exception clause, but this recent measure reversed the situation.

On the 4th, the scheduled payment amount for Russia's foreign currency debt was $640 million in total, including $550 million principal on bonds maturing in 2022 (approximately 675.9 billion KRW) and $84 million interest on bonds maturing in 2042. With U.S. banks announcing the suspension of foreign currency payment agency services, the Russian government revealed plans to pay the amount in rubles to Russian deposit institutions and then exchange it for dollars afterward. Russian Railways also attempted to fulfill a $600 million payment maturing on the 5th in rubles.

Recently, as Russia attempted partial ruble repayment of dollar bonds, according to credit insurance statistics, the probability of Russia defaulting within one year soared to an all-time high of 99%. As default concerns grew, Russian government bond prices plummeted, and the Russian CDS quotes in the credit derivatives market surged. Some market participants are believed to have made significant profits through arbitrage in this situation, and rumors circulated that three firms?JP Morgan, Goldman Sachs, and Barclays Capital?generated $250 million in profits from Russian bond and derivatives trading.

This content was produced with the assistance of AI translation services.