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Russia has defaulted on its foreign debt after a grace period on bonds interest payments lapsed on Sunday.
The expiry of the 30-day grace period means Russia is in default on its foreign currency debt for the first time since 1918 – the last time it happened being well over a century during the Bolshevik revolution.
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Moscow’s default comes after a series of tough sanctions from the US and other Western powers following Russia’s invasion of Moscow earlier in the year.
However, Russia says it’s not in default. Indeed, according to reports, the country says it made payments on the two foreign debt bonds late May. These payments are allegedly however “stuck” hence the artificial default.
Giles Coghlan, Chief Analyst, HYCM, said in a statement obtained by Invezz:
Despite the flurry of headlines, the Russian debt default is largely a symbolic and technical default at the moment. With Russia benefiting from the high price of its energy exports, it clearly has both the means and the desire to pay its foreign debt.”
On what this means for markets, Coghlan said the event is unlikely to affect stocks or the Euro. Investors, who might want to take action will also most probably adopt a ‘wait and see’ approach. He explained:
As investors have been pricing in the default for months, at this stage the markets are taking a ‘wait and see’ approach – if the conflict in Ukraine fades over the medium-term, then payments are likely resume at some point. At least for now, this will not affect European stocks or the EURO due to the nature of the default.”
European stocks closed Monday slightly higher, with the Stoxx 600 ending the day 0.5% up. The FTSE 100 closed nearly 0.7% higher, while Russia’s MOEX added nearly 1.1%.
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Image and article originally from invezz.com. Read the original article here.