Russia moved closer to avoiding an historic debt default Tuesday after a clearinghouse processed its bond payments. The Russian Finance Ministry last week said it made $649 million of payments in dollars, having previously attempted to pay in rubles. The money being processed by at least one clearinghouse was a sign that the payments were moving through the system. Loading Something is loading.
Russia looked set to avoid an historic debt default in dramatic style on Tuesday, as the government’s bond payments worked their way through the global financial system.
An international clearinghouse processed payments on Russia’s foreign-currency denominated bonds on Monday, a person familiar with the matter told Insider on Tuesday.
Only a week ago, strategists expected Russia to default on its foreign debts for the first time since 1918. They expected the default to come Wednesday, when a 30-day grace period on the 2022 and 2042 bonds is due to end.
The US Treasury moved in early April to block Russia from making dollar bond payments using reserves at American banks, in an effort to force Russia to drain its own dollar reserves and to ramp up the pressure on the country over its invasion of Ukraine.
Yet Russia’s Finance Ministry announced last week that it had made the $649 million of payments, in dollars, and that the funds were with the paying agent, Citibank. Citi did not immediately respond to a request for comment.
The fact that payments had made their way to at least one clearinghouse as of Tuesday was a sign that the money was edging closer to bondholders’ accounts. If the cash reaches investors, Russia will have officially avoided default.
Timothy Ash, an economist at BlueBay Asset Management, said on Twitter it was “remarkable” that Russia looked set to make the dollar payments.
Russia had originally attempted to make the payments in rubles, rather than dollars. But it changed direction at the last minute, in a clear sign that the government is desperate to avoid a default, which could lock it out of global financial markets for years to come.
Clearinghouses are financial institutions that effectively act as middlemen and ensure that parties are fulfilling their obligations.
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