May 23, 2022

Hardwood Paroxysm

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Stock Exchange: Europe closes a stimulus and Moscow does not pay its bonds – International

European stock exchanges jittered, prompted by the draft peace plan between Russia and Ukraine

Russia is unable to pay coupons on bonds owed to foreign investors: The countdown has officially begun for what could become a file A huge debt default that would bring the country to its knees With global repercussions. Russia’s Finance Ministry said it had issued an order to pay $117 million owed to Eurobond holders, which must be in dollars. But he also acknowledged that the money “may not reach the bondholders”. Indeed, some investors have not yet received the amounts due. However, technically there is a 30-day “grace period” that gives time until April 15th to avoid the formal announcement of default. May mean bankruptcy, will trigger state risk insurance contracts, the outbreak of instant payments that are impossible to obtain Moscow, which will become a pariah from the financial system like Argentina. Another earthquake for an economy already stifled by Western sanctions, 10% inflation and the costs of the war in Ukraine. But, it is also possible, for the global economy. Moscow’s foreign currency debt alone is $150 billion. And since, even before the war, Russia had an investment level rating (and therefore not speculative), these bonds are in the hands of investment funds around the world, insurance companies, pension funds: not just hedge funds. A time bomb that represents public debt for only 40 billion: the bulk consists of bonds from Russian companies popular with Western investors such as Gazprom (more than 28 billion), Russian Railways (almost 5 billion), Rosneft and Lukoil (2.5 and 2.3 billion, respectively), such leading banks as Vtb and Alfa Bank (2.3 and 2.1 billion), Vnesheconombank (3.8 billion), Sberbank (3 billion). Stock exchanges paid more attention to the glimmers of a negotiated solution to the war: Milan in a strong rise (+3.34%), such as Paris (3.68%) and Frankfurt (+3.76%), Btp-bund spreads falling to 150. After all, Russian defaults A little artificial: not that Moscow has no money, but that the war spilled over into the economy, and sanctions seized more than half of Vladimir Putin’s foreign exchange reserves, which responded by banning foreign currency. Float. For the Russian president, this is the argument for saying that it is the United States and the European Union that have “lagged” behind Moscow: they are the ones who have “really failed”. Even the Minister of Finance, Anton Siluanov, who admitted that the bond payment due in 2023 and 2043 “may not reach the investors”, tried to throw the ball into the opponent’s court: the payment could have been transferred but the bank holding foreign currency accounts could not pay it via borders, and now it depends on the US authorities. Moscow continues to finance itself at a rate of half a billion per day from gas sales to Europe. It will also get 17 billion SDRs from the International Monetary Fund, which pressure from the United States and the European Union has not yet been able to prevent. But how seriously investors take the risk of insolvency (and constitutes an effective Western lever towards Moscow) is attested by rating agency Fitch, which warned: a ruble payment “would constitute a default event.” And it rounded redde to April 2, because even the coupons of Russia’s Ofz bonds that expired on March 2 didn’t reach foreign investors. The threat that is beginning to provoke the Russians: after all, it is Putin’s reassurances – “the nation’s economy will surely survive” and the chaos of 1998 will return – exposing Moscow’s fears.

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In terms of raw materials, both oil and gas have reversed course, after a bullish start. Brent fell 0.6 percent and was less than $100 (99.3) a barrel. West Texas Intermediate crude is down 0.5% and is approaching $96 a barrel. The price of gas in Amsterdam fell to 110 megawatt-hours, after opening at 117, a decline of 4.13%. In London, the price is 266 pence per Mmbtu Thermal Unit with a decrease of 3%, and among the metals, nickel returned to circulation in London, losing 5%. Trading lasted a few seconds and due to a technical issue with the 5% price cap falling, trading was suspended again. On the foreign exchange front, the ruble is recovering. The Russian currency that was traded before the war in Ukraine at 75 on the US currency, is trading at 100 on the dollar and 110 on the euro which in turn changes at 1.10 on the dollar.

pricegold Slightly down. The metal with immediate delivery was priced at $1,915, down 0.15%.