Advanced Theory & Practice of Bonds

Recognized under IBF-FTS | 7-8 June 2022 | 12 CPD Hours

Comprehensive 2-day course on bonds designed for private bankers, wealth managers and advisors.

Timeline and Latest Updates

  • May 26, 2022:The Russian Finance Minister said that Russia would pay its dollar debts in rubles after the US let a key sanction waiver expire earlier this week. Russia had wired $71.25mn for a dollar bond and €26.5mn for an EUR-denominated bond just a few days ahead of a US waiver. It has $100mn in foreign debt payments due on Friday, May 26. The bonds’ contracts do not allow it to pay for in rubles, thereby triggering a 30-day grace period before Russia could be in default.
  • May 25, 2022: The US has let a key sanctions waiver expire where US banks and individuals will be barred from accepting bond payments from Russia’s government after 12:01a.m. New York time on Wednesday. Bloomberg notes the move indicates that the US would force Russia into default than allow the latter to drain its coffers to the benefit of US investors. For the remainder of 2022, Russia owes about $1bn in coupon payments on offshore bonds. Separately, Russian lawmakers on Tuesday gave an initial approval to a bill allowing Russian entities to take over foreign companies that have left the Russia in reaction to the Ukraine war.
  • May 23, 2022: Ukraine was downgraded to Caa3 from Caa2 by Moody’s due to increased risks on its government debt sustainability in the aftermath of the invasion by Russia. The elongated military conflict increases the chances of a debt restructuring and risks of private sector creditors losing out. While Ukraine is receiving financial support in the short-term, the “resulting significant rise in government debt is likely to prove unsustainable over the medium term”. Moody’s estimates financing needs of ~$50bn for 2022, i.e., 35% of expected 2022 GDP and forecasts government debt at ~90% of GDP from around 49% at end-2021. In the event of a default, Moody’s expects a recovery of about 65-80%.

    Russia wired $71.25mn for a dollar bond and €26.5mn for an EUR-denominated bond just a few days ahead of a US waiver allowing such transfers expiring on May 25. While it is unclear if the funds would reach foreign holders, the update indicates Russia’s intention to avoid default.

  • May 20, 2022: Russia’s Finance Minister Anton Siluanov emphasized that the nation will service its offshore debts in Rubles if all options are blocked. He stated, “We are not going to call any defaults, we have money – unless Western countries make it impossible to service our debts… We will be able to pay and will pay foreigners in rubles as a last resort option if Western [financial] infrastructure is closed for us”. Meanwhile Russia’s central bank eased restrictions for banks to sell foreign currency except USD and EUR without any restrictions from May 20. The restrictions on the above two currencies are set to remain in place until September 9.
  • May 18, 2022: The US Treasury Department is set to fully block Russia’s ability to make good on its dollar bonds after a a temporary exemption lapses on May 25, as per sources. The sources note that the exemption allowed Russia avert default on its government debt. Russia’s next sovereign payment is a dollar bond coupon on June 24. Overall, Russia has over $490mn in foreign-currency bond payments owed to creditors by the end-June.
  • May 12, 2022: Gazprom will repay $3bn of bonds early. While EU’s sanctions forbid dealing with Russian state companies, there is a carveout for transactions “strictly necessary” for purchasing or transporting oil, natural gas and other commodities. According to a filing on May 4, the above carveout does not apply to some of its bonds and can trigger an “illegality event” clause for its bonds due September 2022 and November 2023. Hence these bonds need to be redeemed early.
  • May 09, 2022: Gazprom’s 4.375% dollar bonds due September 2022 rose 19%. While there was no specific news on the company paying its bonds, Reuters notes that the company wrote to its European clients seeking to reassure them that they can keep paying for gas without breaching sanctions. They noted that the update is the latest indication that Russia is trying to find a way to ensure that the gas flows through to the continent.
  • May 04, 2022: Russia is set to avoid a default on its offshore bonds after sources said that overdue payments on two of its eurobonds were sent to creditors. Reuters cites a senior US official confirming that the payment was made without using reserves frozen in the US, adding that the ‘exact origin of the funds was unclear’. This comes after Russia was due to pay $650mn on April 4 with its 30-day grace period expiring on May 4. In May, Russia has coupon payments due on May 27 for a dollar bond and euro-denominated bond. The Russian Finance Ministry confirmed that it made the payments to the paying agent, Citibank, N.A., London Branch.
  • April 28, 2022: Russia’s Lukoil made an offshore coupon payment of $34.2mn on its bonds due April 2023 with Bloomberg reporting that some in investors received the funds. How exactly did the company make the payment is not known yet. Lukoil made the payment only days after the company said its sanctioned CEO and founder would resign. Russian companies have been seeking alternative ways to make payments on offshore bonds including investigating debt swap measures.

  • April 25, 2022: In the latest effort to be able to make payments on offshore notes due to western sanctions, Russia’s Sovcombank PJSC will offer a bond swap to its eurobond. The company was due to make a $12mn interest payment on its notes on April 7, but instead paid the bond in rubles on April 21. PAO Sovcombank will now register a new issue of urgent local subordinated bonds and offer Eurobond holders to exchange them for the new ruble-denominated bonds. Through this, holders will now be able to receive payments directly in Russia, bypassing the international payment sanctions.
  • April 21, 2022: Russia was judged to have breached terms of two bonds by the Credit Derivatives Determinations Committee (CDDC) given that it paid the bonds in rubles instead of dollars. The committee rules that it was a “Potential Failure-to-Pay” event for CDSs. The bonds’ grace period ends on May 4.
  • April 20, 2022: The Russian central bank said that it decided to ease foreign exchange currency control measures for export-focused companies outside of the commodities and energy sectors. Under the new measures, the foreign currency that the companies receive on exports can now be sold and converted within 60 days instead of the prior 3 days.
  • April 19, 2022: Russia’s business lobby, the Russian Union of Industrialists and Entrepreneurs (RSPP) is discussing alternative ways to pay its offshore bonds with the government and the Central Bank. One alternative is where bondholders decide to change the foreign paying agent and registrar to the onshore National Settlement Depository (NSD). Another alternative is to organize payments to non-residents on special accounts in Russian banks, along with a right to sell the notes to the Finance Ministry/its agent. Through the above, companies can avoid a situation where foreign creditors can claim a default due to payment delays and also stop an overseas asset freeze against the companies.
  • April 18, 2022: Russia may be in default after trying to repay its dollar bonds in rubles due to sanctions, according to Moody’s. The grace period on the bonds end on May 4 and if not repaid appropriately, may be considered in default as the bond has “no provision for repayment in any other currency other than dollars”.
  • April 13, 2022: The EMEA Credit Derivatives Determinations Committee (CDDC) on Tuesday accepted a request to look into Russia’s potential payment failure on its offshore bonds. The matter concerns CDS protection buyers’ payoff if a potential default occurs that could see billions of dollars in default insurance. JPMorgan said in a note that $3.43bn of net notional Russia CDS are currently to be settled. This comes after Russia made a payment due on April 4 on two sovereign bonds in roubles instead of dollars as US Treasury sanctions did not allow the payment.

    On related lines, Russian Railways denied that it was in default, saying that it paid all its debt obligations but that intermediaries blocked payments. This comes after a derivatives panel ruled that it was in default because of a “failure to pay.’

  • April 12, 2022: Russian Railways JSC was ruled to be in default by the Credit Derivatives Determinations Committee after its coupon due on March 14 did not reach investors by the end of a 10-day grace period. Bloomberg notes that the above could set a precedent for the Russian government and local companies that now are under a similar situation due to sanctions.
  • April 11, 2022:
    • Russia was cut to SD from CC by S&P after it made coupon and principal payments on its offshore bonds due 2022 and 2042 in rubles. This was after the US Treasury halted dollar payments from Russia’s accounts in US banks. S&P added that the default looks inevitable since it does not expect that investors or the government would be able to convert the payments into dollar equivalents before the bonds’ 30-day grace period. S&P subsequently withdrew its ratings on Russia due to the EU’s decision to ban ratings on Russian entities.
    • Russia’s Finance Minister Anton Siluanov said, “We do not plan to go to the local market or foreign markets this year. It makes no sense because the borrowing cost would be cosmic”. CDS implied probability of default on Russian debt stood at 99% last week, as per Bloomberg. On related lines, the nation said that it will sue and take legal action if it is forced to default\ on its debt, given that it has displayed its efforts to pay in both foreign currency and rubles.
    • On another note, Russia relaxed its temporary capital control measures which were take to limit the drop in the rouble. It will now allow individuals to buy cash foreign currency and also scrapped a 12% commission for buying forex through brokerages. Regarding the former, the maximum amount that can be withdrawn until September 9 is $10,000.
    • Separately, Germany’s banking regulator said that Russia’s VTB Bank was removed from controlling its European subsidiary VTB Bank SE. Also, the Irish Times reported that Russia’s Sovcombank PJSC is the first among the nation’s banks to say it will miss a payment on its offshore bonds due to sanctions
  • April 08, 2022: Belarus is set to pay its offshore debt in local Belarusian ruble, given the sanctions on its payments. In a statement, the Belarusian government said that it has been “forced” to use local currency to service loans owed to the World Bank, EBRD and the Nordic Investment Bank. TD analyst Cristian Maggio says that while it is not clear if Belarus would use its own currency for all or a part of the payments, in either case, they would be “default scenarios”.

    Separately, Russian Finance Minister Anton Siluanov said, “We will do everything so creditors receive their invested money from the Russian Federation”. He added that the ministry would also recommend Russian banks not to pay dividends on their 2021 results.

  • April 07, 2022: Russia said it has set aside rubles to pay its international dollar bondholders where payment was due on Monday, but blocked by the US Treasury.
  • April 06, 2022: US and its allies are set to impose a fresh wave of sanctions on Russia amid mounting global accusations of Russian war crimes. With the US Treasury blocking Russia’s sovereign USD-denominated bond payment on Monday, Russia’s probability of default derived from it 5Y CDS rose from 77.7% to 87.7% as per Bloomberg. Separately, Russia’s VTB Bank paid coupons in rubles to holders of its subordinated bonds denominated in USD and EUR. It made a total payment of RUB 255.7mn ($3.1mn) for coupons on two EUR-denominated bonds and RUB 312.3mn  ($3.7mn) on its USD-denominated bond.

Both Ukraine and Russia’s bonds have been impacted the most, in particular the former’s bonds. Many of Ukraine’s and Russia’s bonds were trading close to par prior to the escalation of issues in November 2021. They are now trading at a discount, making their bonds among the top losers in the new year. Below is a chart with some of Ukraine’s and Russia’s dollar bonds for more perspective.

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US 10Y Treasury yields which initially crossed 2% for the first time since July 2019, retreated sharply to 1.85% on the back of risk-off tensions. Gold, a well known haven asset touched a 13-month high. Commodity prices have risen with Brent Crude in particular seeing a sharp rally on fears of a supply disruption by Russia. Brent which began 2022 at just over $77/bbl, just stopped short of hitting $100/bbl on February 22. Other commodities like wheat and corn have risen, with the FAO food price index at a decade high as supply chain issues along the Black Sea could get impacted on sanctions. CDS spreads across Russia and Ukraine have widened considerably as shown in the chart below.

  • April 05, 2022: The US Treasury has halted dollar debt payments from Russian government accounts at US banks including the correspondent paying bank JPMorgan, as per Bloomberg. A  spokesperson for the Treasury’s Office of Foreign Assets Control said that the move forces Russia to choose among three options -- draining dollar reserves held in its own country, spending new revenue, or going into default. This move will also raise scrutiny on Russia's payments due on May 27 for interest owed on sovereign USD and EUR bonds due 2026 and 2036, says Bloomberg.
  • April 01, 2022: Russia bought back $1.45bn equivalent (around 72%) of its $2bn 4.5% dollar bonds due April 4. The buyback was a step to ensure that local investors are repaid irrespective of sanctions. The repurchase now leaves only $552.4mn of its dollar bond to be redeemed in USD on the maturity date, where holders who did not participate in the buyback await their redemption. Russia also made its payment of $446.5mn - coupons of $87.5mn and a principal of $359mn, as per a Bloomberg source, who stated that JPMorgan (paying agent) processed the payment. Meanwhile Russian corporates like Russian Railways JSC, EuroChem and Chelyabinsk Pipe Plant have seen the grace period lapse on its euro bonds, thereby missing the deadline for coupon payments on their offshore bonds.
  • March 31, 2022: Russia plans to pay its 4.5% dollar bonds due April 4 in USD, according to sources. However, the Finance Ministry also launched a buyback in rubles as expected, with Bloomberg noting that it would ensure local investors get paid. Russia has an $87.5mn coupon payment on its 7.5% 2030s due today.
  • March 30, 2022: Russia's deputy defence minister said that the country has decided to 'radically' cut its military activity focused on Kyiv and Chernihiv after talks between Russian and Ukrainian negotiating teams in Turkey. This move has led to an easing of the risk-off sentiment surrounding the Russia-Ukraine crisis. Bondholders cheered the news, with Russia and Ukraine sovereign and select corporate shorter-tenor dollar bonds rallying on Tuesday. In related news, Russia offered to buyback its dollar bonds due April in rubles instead of dollars. It has a $2bn repayment on its 4.5% bonds due April 4. While the quantum of buyback was not mentioned, the Finance Ministry said it will buy them at a price of 100% of nominal value. Analysts say that while the payment in rubles will help local holders and the sovereign's hard currency repayment burden, it again rekindles default fears. This is because the $2bn bonds prescribe that repayment has to occur in dollars. The bonds have a 30-day grace period. Russia made recent Eurobond payments in March in hard currency and staved-off a default despite sanctions. On March 31, it has another $447mn payment due.
  • March 29, 2022: According to filings with the National Settlement Depository (NSD), Russia is making coupon and principal payments on its bonds next month. The principal repayment is on $2bn of its 4.5% dollar bonds due April 4. The coupon is for $84mn on its 5.625% dollar bonds due 2042. While the payment on its dollar bonds went through last month after delays and hurdles due to sanctions, the upcoming payments could also face potential settlement issues.

    Separately, Credit Suisse is being probed by US lawmakers with regard to compliance with sanctions. The bank was asked to hand over documents related to the financing of yachts and private jets owned by potentially sanctioned individuals.

  • March 25, 2022: Moody's has followed S&P and Fitch in withdrawing from publishing ratings for Russian entities, after suspending commercial operations in Russia.

    Separately, Bloomberg sources said that at least two international bondholders said that their accounts received $66mn in coupon payments in dollars from Russia's sovereign bonds. The payment, which was due on March 21 with a 30-day grace period, has been slowly moving through the financial system for the past three days, they note. The Russian Finance Ministry earlier said that it transferred the cash to the settlement depositary, thereby meeting its obligations “in full.”

  • March 24, 2022: Fitch said that it will withdraw all its ratings on Russian entities and their subsidiaries in order to comply with European Union sanctions, on similar lines to that of S&P's withdrawal a day earlier. The withdrawal of ratings will take effect on April 15.

    Russian steelmaker Severstal said that it would apply for a special licence to process a Eurobond coupon payment. Citibank did not process a payment Severstal sent last week to cover the coupon on its 2024 loan participation notes (LPN) and the grace period expired on Wednesday. A source said that Citibank recommended that Severstal ask the US Treasury's Office of Foreign Assets Control (OFAC) to provide a licence that would allow it to process the payment. Severstal's main shareholder, Alexey Mordashov, was placed under sanctions by the European Union and Britain but not by the US; Severstal too is not subject to US sanctions.

  • March 23, 2022: Tinkoff Bank, Russia's biggest online lender paid coupons on its dollar bonds with some bondholders receiving the cash, as per sources. Bloomberg notes that while the company is not on the sanctions list, investors are keeping a close eye on coupon payments due to the large number of sanctions and penalties imposed globally onto Russia.  Evraz Plc's $18.9mn bond coupon reached its paying agent BNY Mellon after it was temporarily frozen yesterday by SocGen NY, following its ties to sanctioned billionaire Roman Abramovich. Ukraine has raised another UAH 6.04bn ($206mn) via 1Y war bonds at a yield of 11%, its fourth such sale since the war began a month ago.
  • March 22, 2022: S&P Global is withdrawing credit ratings of all Russian entities by April 15, after the European Union’s decision last week to ban firms from providing ratings to Russian companies.

    Separately, a $18.9mn coupon payment of Russian steelmaker Evraz Plc was blocked due to its ties to sanctioned billionaire Roman Abramovich, Bloomberg reports. The company transferred the cash a week ago for the payment but its correspondent bank, Societe Generale New York, halted its transfer to paying agent BNY Mellon for compliance reasons. Abramovich holds  28.64% of the company’s equity. “Apart from malfunction of financial infrastructure, there are no reasons for a Potential Event of Default... The Issuer has sufficient liquidity to complete the coupon payments", Evraz said in a statement.

  • March 18, 2022: Russia was downgraded to CC from CCC- by S&P due to "reported difficulties" meeting coupon payments on the due date on its dollar bonds due 2023 and 2043. This is due to the international sanctions that have reduced Russia's available forex reserves and restricted access to the global financial system. S&P also believes that funds transferred debt service payments on its domestic OFZs to Russian domestic accounts might not be available to some nonresident bondholders.

    However, later in the day news emerged regarding the payment of the dollar bond coupons due March 16. Sources said that JPMorgan had processed funds that were earmarked for it and sent the money on to Citigroup. JPMorgan was the correspondent bank Russia used to send the payment to Citigroup and that it was done after seeking required approvals from US authorities . Citigroup is acting as the payment agent on the bonds, the sources note. Russian officials have said if the payment in dollars is blocked, it would pay back in rubles. Bloomberg notes that JPMorgan's processing of funds has lent optimism that the bonds may still be settled in dollars. Russia's dollar bonds have rallied up to 14 points on the update.

  • March 17, 2022: Russia’s Finance Minister Anton Siluanov said that Russia had attempted to make interest payments on its two dollar-denominated government bonds in rubles. However, he said that it was up to the US to make sure that the payments go through. The two dollar bonds do not allow coupon payments to be made in rubles. In related news, Russia's state-owned energy company Gazprom repaying its Samurai bonds (denominated in Yen) in rubles is likely to be considered a default according to Tadashi Maeda, governor of state-affiliated Japan Bank for International Cooperation (JBIC).
  • March 16, 2022: Rating agency Fitch said that if Russia does make the two dollar bond coupon payments due today (March 16) in rubles, it would constitute a sovereign default after a grace period expiration. It said that the ratings would be cut to D from C after the grace period expires, while Russia's long-term foreign currency rating would be set at Restricted Default. 

    Ukraine has raised another UAH 5.4bn ($185mn) via domestic hryvnia and dollar-denominated war bonds. It raised $12mn via 1Y dollar bonds at 3.7% while the local bonds yield 11%. This  brings the total raised so far from so-called war bonds to $691mn. Timothy Ash, a senior emerging market sovereign strategist at BlueBay Asset Management called the issuance the "ultimate ESG play" adding, “If fund managers and pension funds want to support a number one ESG story, then surely this is it. This is a country fighting for democracy, human rights, European values and the war bond is to support that.”

  • March 15, 2022: Russia's Finance Ministry issued an order to pay Eurobond holders $117mn in coupons while not mentioning whether the payment was in dollars or ruble. The bonds are denominated in dollars, but the finance minister has emphasized earlier that Russia will ultimately pay in rubles if sanctions do not allow dollar-based settlements. He said, "The freezing of foreign currency accounts of the Bank of Russia and of the Russian government can be regarded as the desire of a number of foreign countries to organize an artificial default that has no real economic grounds". Although some of Russia's foreign currency bonds have provisions to be paid in rubles, the Eurobonds linked to the $117mn coupons do not.
  • March 11, 2022: Russia's Finance Minister Anton Siluanov commented about debt repayments. He said, “We will repay our external obligations in rubles, but we will carry out the conversion as our gold and foreign exchange reserves are unfrozen... In the past two weeks, western nations have effectively launched a financial and economic war against Russia. The West has defaulted on its financial obligations to Russia, frozen our gold and currency reserves, sought to halt our foreign trade, our exports, by all means possible, harming global trade in the process.”
  • March 10, 2022: Ukraine and Russia agreed to a daylong ceasefire on Wednesday to allow civilians to escape the fighting via evacuation corridors. Separately, Russia's Dmitry Birichevsky, the director of the foreign ministry's department for economic cooperation said, "Russia's reaction will be swift, thoughtful and sensitive for those it addresses", regarding its response to sanctions.
  • March 9, 2022: US and UK banned imports of oil and gas from Russia on Tuesday. The EU too announced that they plan to cut Russian gas imports by two-thirds in the span of a year. FT however notes that the ban will be 'far less disruptive to global markets than a full international embargo' as Russian shipments to both countries account for only up to 8%.

    Russia was downgraded a further six notches to C from B by Fitch, just one notch above default, with the view of a sovereign default being imminent after the Presidential decree, ratcheting sanctions and other measures impacting the country. This comes just a week after an earlier six notch downgrade by Fitch on March 2 from BBB to B.

    Ukraine's finance ministry on the other hand said that it will service its debt on time and in full. Ukraine has a total of $3.7bn in total debt due between March-December this year. Kyiv is expected to receive €300mn ($328mn) from the EU, $350mn from the World Bank and was offered $1bn of loan guarantees from the US. Besides, Ukraine also raised UAH 6.7bn ($229mn) via its second war bond auction at a yield of 11%.

  • March 7-8, 2022: Credit Default Swaps (CDS) that insure $10mn of Russia's bonds for five years now indicate a default probability of 80% as per ICE Data Services calculations. ICE said that the upfront cost of protection demanded from CDS sellers rose from $4mn last week to ~$5.8mn. Russia has $117mn in coupons due on March 16 which do not have an option to allow repayment in rubles, and thus do not fall under Putin's decree during the weekend.

    JPMorgan Chase announced it will remove Russian debt from all of its fixed-income indices beginning March 31. This follows similar moves from MSCI, S&P Dow Jones and FTSE Russell. Russian bonds will be removed from JPMorgan’s “hard currency” corporate and sovereign indices as well as its index for debt in EM currencies, FT notes. Besides, their debt will also be removed from ESG indices. The sanctions have made their debt almost untradeable and illiquid thus not meeting the criteria that the indices have according to Pramol Dhawan, Pimco's head of EM portfolio management.

  • March 5-6, 2022: According to a decree by Russian President Vladimir Putin On Saturday, March 5, Russia and Russian companies will be allowed to pay foreign creditors in rubles (RUB), in an effort to avert default. The Russian government will prepare a list of countries which it called, “countries that engage in hostile activities”, where temporary rules for sovereign and corporate debtors will be in place to make payments to creditors. Debtors can ask a Russian bank to create a special “C” RUB-denominated account in the name of foreign creditors for settlement. For countries that have not imposed sanctions, creditors will receive payment in the same currency that the debt is denominated provided the debtor gets a special permission to do so. On March 2, Russia paid coupons on its OFZs, but foreign holders were not paid as the Russian central bank barred foreign payments. Whether the event constitutes a default or not is subject to debate. On the other hand, some of Russia’s non-ruble denominated sovereign bonds do allow payments in rubles, which can impact holders of CDS protection. JPMorgan strategists note that the option to pay for in RUB “may render these bonds out of scope for CDS... This means that bonds with ruble fallback provisions can neither trigger CDS nor be delivered into CDS". Russia has $117mn in coupons on dollar bonds due March 16. JPMorgan strategists point out these bonds do not have an option to be paid in RUB - hence if Russia decides to pay in RUB, “that would be an event of default and would trigger CDS". The Russian finance ministry came out saying that the payment to foreign bondholders ultimately depends on the sanctions.

    Separately, Ukraine was downgraded 2 notches to Caa2 from B3 by Moody's following the "intensification of Russia's (B3 review for downgrade) military invasion of Ukraine". The invasion's impact on Ukraine's economic and fiscal strength could hurt its sovereign debt repayments. According to Moody's, "Ukraine's buffers and forthcoming substantial international financial support will not be sufficient to fully offset liquidity risks". Moody's added that Ukraine's ratings remain on review for further downgrade. Russia was downgraded 4 notches to Ca from B3 by Moody's on expectations that capital controls by the Central Bank of Russia (CBR) will restrict cross border payments including debt service on government bonds.  Sanctions, SWIFT payment restrictions and other measures have impacted macro-economic stability and Moody's expects real GDP to contract by 7% in 2022. Also, the weakening ruble is set to bring higher inflation. 

  • March 3-4, 2022: Russia was downgraded by a solid 8 notches to CCC- from BB+ by S&P following the imposition of measures and sanctions that are expected to substantially increase the risk of default. The measures have impacted its available forex reserves by as much as half, including foreign currency deposits and securities domiciled in the US, the EU, and Japan. Thus, Russia's external liquidity has been weakened significantly. Capital control measures are likely to restrict interest and/or principal payments on time for non-resident bondholders.

    Separately, Ukraine has planned a second 'war bond' auction to fund its military and resist Russia’s invasion. This comes after it raised UAH 9.013bn ($300mn) via 1Y zero-coupon war bonds on March 1, 2022.

  • March 2, 2022: Russia was downgraded six notches by Fitch, from BBB to B. The sanctions applied on Russia by EU and the US are expected to cause a severe shock to its credit fundamentals, hurting financial flexibility and increasing the uncertainty regarding the willingness to pay. Besides, sanctions are tightening rapidly, thereby impacting Russia more than previous sanctions in its history. Further banking sector sanctions are likely after those that have impacted banks like Sberbank and VTB. Heightened macro-financial risks weigh on the country with the ruble's depreciation, deposit outflows and lower trend GDP growth. Other financing flexibility constraints, fiscal risks, political and geopolitical risk and uncertainty have caused structural weakness.
  • February 28-March 1, 2022: Russia's central bank banned coupon payments to foreign owners of RUB 3tn ($29bn) of local Ruble-denominated government bonds known as OFZs. The next coupon on OFZs are due on March 3, for bonds maturing in 2024. The Bank of Russia issued the above instruction alongside a freeze on local security sales by foreigners, to depositaries and registries. “Issuers have the right to make decisions on the payment of dividends and the making of other payments on securities and transfer them to the accounting system. However, the payments themselves will not be made by depositories and registrars to foreign clients. This also applies to OFZ", the central bank said. The central bank did not specify how long the ban will last.

    Allianz, BlackRock and Vanguard are the three biggest holders of OFZs as per Bloomberg data with about $2.2bn, $1bn and $790mn equivalent in holdings. While Allianz and BlackRock did not comment on the coupon ban, Vanguard said it “is reviewing the various global sanctions and determining the impacts to our funds".

  • February 25-27 2022: Ukraine was downgraded to B- from B by S&P and to CCC from B by Fitch following the military invasion by Russia. Its low external liquidity relative to sovereign external debt service, expected capital outflows and fall in domestic confidence, inflationary pressures and volatility are expected to weigh on the nation. Russia was cut to junk status of BB+ from investment grade ratings of BBB- by S&P. Strong international sanctions are expected to have both, direct and second-round effects on foreign trade, domestic/private sector confidence and financial stability. US and the European Union (EU) have also excluded some Russian banks from the SWIFT payment system, move that would cripple payments both to and from Russia.
  • February 24-25, 2022: In the aftermath of the military operations by Russia in Ukraine, the US and UK imposed a slew of measures including sanctions on Russia alongside UK also announcing similar sanctions. Sanctions by the US included:
      • Severing the connection to the US financial system for Russia’s largest financial bank, Sberbank, including 25 subsidiaries. Sanctions on Russia’s second-largest financial institution, VTB Bank, and its subsidiaries. Similar sanctions on Bank Otkritie, Sovcombank OJSC, and Novikombank and dozens of its subsidiaries
      • New debt and equity restrictions on 13 critical Russian financial entities
      • Additional full-blocking sanctions on Russian elites and their family members and individuals “who have enriched themselves at the expense of the Russian state”
      • Russia’s military and defence ministry being restricted from buying nearly all US items and items produced in foreign nations using certain US-origin software, technology, or equipment.
      • Sanctions on defence, aviation, and maritime technology aimed at choking off Moscow’s import of tech goods
      • Licensing exemptions for countries that adopt export restrictions on Russia
  • February 24, 2022: Russian President Vladimir Putin announced a "military operation" in Ukraine  with explosions heard in capital city Kyiv and cities like Kharkiv. The military operations are part of demilitarizing Ukraine, and all Ukrainian servicemen who lay down arms would be able to safely leave the combat zone, Putin added. News agencies note that Putin mentioning the responsibility for bloodshed lying with the Ukrainian "regime" and that other countries with any attempt to interfere with the Russian action would lead to "consequences they have never seen". The announcement came at a time when the UN was in the middle of an emergency meeting discussing the Ukraine crisis. Putin noted that US and its allies were ignoring Russia's demand to prevent Ukraine from joining NATO and offer Moscow security guarantees. Just few hours prior to the attack, Ukraine had declared a state of emergency for 30 days.
  • February 23, 2022: US President Joe Biden launched a streak of sanctions on Russia, calling that latter’s move into eastern Ukraine as “beginning of an invasion”. Some of the sanctions aimed at stopping western financing/trading of Russia’s new foreign debt securities and targeting two of Russia’s largest financial institutions, VEB and Promsvyazbank.
  • February 22, 2022: Russian President Vladimir Putin, following a meeting with his Security Council, declared independent, two separatist eastern Ukraine regions, Donetsk and Luhansk. The decree allows them to sign treaties with the separatist regions and openly send troops and weapons there with western officials believing that Russia could invade Ukraine any moment using the decree as a pretext for an attack.
  • February 21, 2022: In a last ditch effort towards diplomacy, French President Emmanuel Macron proposed to hold a summit for US and Russian leaders in with the latter two said to have “accepted the principle” of a summit on the condition that Russia does not invade Ukraine.
  • February 16, 2022: Fears of Russia invading Ukraine eased as Moscow said that some of its troops were returning home. This was seen as a positive development, helping Ukraine's dollar bonds rally. However, the US President said that a Russian attack on Ukraine was “still very much a possibility”.
  • February 14, 2022: Russia-Ukraine tensions escalate with US National Security Advisor Jack Sullivan saying that there’s “a distinct possibility that there will be major military action very soon.” US and Europe threatened Russia of economic repercussions in the event of an invasion.
  • February 2-10, 2022: US sends 3,000 troops to protect NATO forces in eastern Europe in early February, later saying that Russian has 110,000 troops on Ukraine's border with 40,000 more set to arrive in a week
  • January 24-26, 2022: NATO puts troops on standby and sends ships and fighter jets to help eastern Europe's defence. On January 25, Russia begins military exercises with 6,000 troops and 60 fighter jets in the south of Russia, near Ukraine and in Crimea. A day later, US says that Moscow's security demands are "unrealistic".
  • January 17, 2022: US announces $200mn in security aid to Ukraine's Kyiv after Russian troops arrive in ex-Soviet Belarus for military drills.
  • December 7, 2021: US President Joe Biden tells Russian President Vladimir Putin that they would hit them with "strong economic and other measures" if Russia invades Ukraine.
  • November 2021: US reports movement of Russian troops near Ukraine's border, with Ukraine noting that ~92,000 Russian troops were set to assemble by end-January/February 2022. Moscow denies the claims saying Kyiv was conducting a military build-up. Russia also demanded a legal guarantee that Ukraine should be denied NATO membership.
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