Russia has been subject to severe economic and financial sanctions from Europe and the United States over the military invasion of Ukraine.


There is growing speculation that the Russian government bond may have been dropped to a "speculative rating" and default = default.

Government bond defaults indicate that the country's external creditworthiness in the market is lost.


How will defaults affect the Russian and global economies?

The market is becoming more vigilant.

(Akihiro Shiraishi, Reporter, Ministry of Economic Affairs)

Russian government bonds downgraded to speculative rating

Following the military invasion of Ukraine and the launch of economic and financial sanctions by Europe and the United States, major rating agencies have lowered Russian government bonds to speculative ratings one after another.



Moody's dropped to "Ca", which is the second from the bottom to indicate "default or near default", and "Fitch Ratings" to "C (close to default)".

The default of government bonds means that the country that issues government bonds = the government does not pay interest or repay the principal to the financial institution that bought the government bonds on time. ..



Originally, Russia, an energy exporter, has the ability to pay.



However, it is very difficult for Russia to secure foreign currency because sanctions in Europe and the United States have frozen foreign currency reserves such as the dollar and excluded major banks from the international payment network.

Russian government bonds “already close to default”?

Under these circumstances, President Putin has signed a presidential decree that allows foreign debt to be paid in the ruble of his own currency instead of foreign currency, but it has already defaulted because it is unlikely that interest payments and repayments will be made in the fixed foreign currency. It is believed to be in a state close to.



Speaking of Russia, it defaulted once in 1998 after the Asian economic crisis.



At that time, it led to the bankruptcy of Long-Term Capital Management, a major American hedge fund "LTCM", which was managed by prominent economists.

What is the effect of defaulting?

This time, market participants see the impact of the default of Russian government bonds.

● Market officials (1)


“It will primarily affect the Russian people.


The value of the ruble will drop significantly, inflation will accelerate. It will be difficult for goods to come in from overseas, and prices will remain stable. On


the other hand, the impact on Japan is limited, and the size of Russian government bonds held by each financial institution is also small.


Also, considering the size of the world economy as a whole, the Russian economy is in a small category and the impact is limited. "

● Market participants (2)


“Russian government bonds are incorporated into index funds and ETFs (Exchange Traded Funds).


By default, asset management companies that own these financial products will suffer thin and widespread losses to individual investors. It

will be.


It is unlikely that it will develop into a financial crisis like the one that occurred in 1998. "

● Financial Services Agency executives


“The amount of Russian government bonds held by Japanese financial institutions such as Mega Bank is not large. Of course, there will be an impact that interest payments will not be received for the amount held, but that is the credit of Japanese banks. We do not see it as a direct risk. ”



Russian government bonds are expected to expire after March 16th, including interest payments.



If you're late for more than 30 days in the grace period, you may get a “default certification” from your rating agency by the end of April, and you're likely to continue to be vigilant.

Scheduled to pay attention

Next week's market will be focused on Russia's default concerns, as well as the FOMC = Federal Open Market Committee before dawn on the 17th.



The Fed has indicated a policy of intermittent rate hikes to steer monetary tightening, but there will be interest in Chair Powell's press conference over future policies following the situation in Ukraine.

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