Default in Russia and its consequences for the ruble exchange rate and the stock market
One of the most authoritative news agencies , Bloomberg , reported that on June 27, 2022, a default occurred in the Russian Federation.
That is, Russia was unable to repay debt obligations to holders of government bonds in the amount of 100 million US dollars.
The money was supposed to be transferred before 24:00 on June 26, 2022, but due to the blocking of Russian accounts, it was technically impossible to complete the obligatory payment.
Therefore, we can say that the default is purely technical, since there is money, but there is simply no way to transfer it to the creditor.
It is clear that this will not happen immediately and a decision of an international court will be required to legalize the process, but this event can transform a technical default into a real one.
Consequences of default in Russia
How will the event be reflected in the exchange rate of the ruble against other currencies and the value of Russian securities?
We can definitely say that it is negative.
The Government of the Russian Federation will require considerable efforts in order to keep the non-cash exchange rate of the national currency at a low level. It is very likely that this week the official ruble exchange rate will fall below 60 rubles per dollar.
It is predicted that the stock market will also react after the start of trading on June 27; most securities will form a downward trend that will last until the situation stabilizes.
In addition to such direct consequences, a default in Russia will have a negative impact on the country’s economy, lower its credit rating and reduce the level of investor confidence.
In general, nothing good can be expected; the situation may improve no earlier than the fall of 2022; it is during this period that most analysts predict a weakening of the conflict in Ukraine and the signing of a peace agreement.