Russia Misses Bond Deadline, Signaling Its First Default on Foreign Debt Since 1918

Russia missed a deadline for making bond payments on Sunday, a move that signals its first default on international debt in more than a century. Efforts to keep Moscow out of capital markets for a long time have been intensified.

A missed May 27 deadline resulted in about 100 million dollars in interest payments not reaching investors. The grace period ended.

Ratings agencies can't report on Russia because of sanctions, so a formal declaration of default needs to come from bondholders. The Credit Derivatives Determinations Committee hasn't been asked to make a decision on these bond payments yet

As of Sunday night, it appeared that the payments hadn't reached the bondholders' accounts. Russia's finance ministry said on Monday that it had made the payments in May but that they had been blocked from reaching bondholders.

The default declaration is being rejected by Russia because it has made attempts to pay. The statements about default were illegal according to the spokesman for the Kremlin.

The problem is that Euroclear didn't transfer the money to the recipients. There is no reason for this situation to be called a default.

According to the finance ministry, the actions of foreign financial institutions are beyond the control of the ministry.

There was a risk of default after Russia invaded Ukraine and the country was hit with sanctions. Russia tried to get around sanctions by sending payments to a Moscow based institution. The funds didn't make it all the way to bondholders' accounts because of sanctions.

The Russian government has not run out of money and this default is not related to that. After months of war, Moscow has $600 billion in foreign currency and gold reserves. Russia is receiving a steady amount of cash from sales of oil and gas. A default would stain the country's reputation and push up its borrowing costs if it is able to tap international capital markets.

The immediate economic and financial impact of this default on international markets and the Russia's budget are expected to be relatively small.

Russia has lost access to international investors as a result of default.

The external market will be closed for the ministry of finance as a result of the default. It's already closed.

Ivan Nechepurenko was a contributor.