never recovered to the point they were before the 2014 sanctions, by the way.

Russian Markets Break Down With Cash Frozen at the Border

Bloomberg News
Wed, March 2, 2022, 8:02 AM
(Bloomberg) -- The Russian stock market has been shut for days and officials are barring any cash going to foreign investors. Funds from London to New York have suspended trading.

For now at least, any financial asset linked to Russia looks all but frozen. Even commodity shipments, the country’s economic lifeblood, are being disrupted and some buyers have refused Russian oil.

As President Vladimir Putin steps up the attack on Ukrainian cities and tougher sanctions take effect, the country’s financial ties to the outside world are breaking down.

Here’s a look at what’s happening in markets:

Sovereign Bonds

Russia paid a coupon due on ruble bonds on Wednesday, but it’s not clear how foreigners will be able to access the cash after the central bank banned transfers to foreign investors.

Investors are still scrambling to understand whether or not the bonds could be in default even after the 11 billion ruble ($98 million) payment that was widely expected. The Bank of Russia has introduced capital controls to in a bid avert a ruble collapse after its foreign reserves were frozen by international governments in response to Russia’s invasion of Ukraine.

The restrictions could leave foreign investors who held almost 3 trillion rubles ($29 billion) in the so-called OFZ debt at the start of February unable to collect income on their holdings -- raising the specter of the nation’s first debt default since 1998. The transfer of the coupon was reported Wednesday afternoon on the website of the National Settlement Depositary.

“Unless it reaches all holders, they can’t deny default,” Paul McNamara, a portfolio manager at GAM Investments, said of the coupon on Wednesday. “They can’t say they paid with any conviction.”

Stocks

Russia will keep local stock trading closed for a third day as its wealth fund prepares to deploy billions of dollars to buy the country’s stocks.

The shuttering of trading on the Moscow bourse is its longest closure for extraordinary circumstances since October 1998, according to the exchange.

Sberbank of Russia PJSC’s depositary receipts traded at a penny in London and other Russian stocks listed in the U.K. collapsed. Europe is winding down and selling units of Sberbank’s business in the region after regulators said they were likely to fail.

Energy

Russia’s flagship Urals crude oil was offered for sale at a record discount but got no bidders, the latest indication that trading of oil from the country’s western ports is grinding to a halt. Consultant Energy Aspects said about 70% of Russian crude trade is currently frozen amid banking sanctions, spiking freight rates and wider political risks.

Currency

The ruble fell for a third day, trading as low as 110 per U.S. dollar in onshore markets. The currency slid as much as 8% and a gap persisted between the ruble’s value in Moscow and that in the overseas interbank market. The offshore rate fell as low as 122.25 per dollar.