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OT: World Politics

AP79 said:
The currency risk is what's stopping people from investing in these bonds. They'd have to index payments to other, more stable. currencies.
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Thats part of it I'm sure, but there is a real risk of worsening balance sheet and debt defaults baked in as well.
 
MindzEye said:
Thats part of it I'm sure, but there is a real risk of worsening balance sheet and debt defaults baked in as well.
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I don't believe there's a risk of bankruptcy if it's in the Russian Ruble, because the government will just print more money. That's where the currency risk comes in, printing money will devalue the currency, meaning investors get less back.

Clarification: are you talking about government bonds or bank bonds?
 
AP79 said:
I don't believe there's a risk of bankruptcy if it's in the Russian Ruble, because the government will just print more money. That's where the currency risk comes in, printing money will devalue the currency, meaning investors get less back.

Clarification: are you talking about government bonds or bank bonds?
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That doesn't explain why they were able to sell the variabe rate bonds though. The same currency risk exists with the variable rate bonds as exists with the fixed rate bonds.
 
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AP79 said:
I don't believe there's a risk of bankruptcy if it's in the Russian Ruble, because the government will just print more money. That's where the currency risk comes in, printing money will devalue the currency, meaning investors get less back.

Clarification: are you talking about government bonds or bank bonds?
Click to expand...

Then it becomes an inflation issue.

There’s no free lunch.
 
MindzEye said:
That doesn't explain why they were able to sell the variabe rate bonds though. The same currency risk exists with the variable rate bonds as exists with the fixed rate bonds.
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I'd be interested in knowing who bought those bonds. However in the current economic setting, it's clear the interest rate will keep rising in Russia so that would make a variable bond more interesting than a fixed rate bond. Regardless, I'm not sure who'd be crazy enough to invest in the Russian Ruble, unless they know something we don't about the next "phase" of the invasion.
 
AP79 said:
I'd be interested in knowing who bought those bonds. However in the current economic setting, it's clear the interest rate will keep rising in Russia so that would make a variable bond more interesting than a fixed rate bond. Regardless, I'm not sure who'd be crazy enough to invest in the Russian Ruble, unless they know something we don't about the next "phase" of the invasion.
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It's all internal Russian money. So the Oligarch class buying government debt at big interest rates, but yeah the bond buying cratered when they stopped offering variable and went full fixed, even at 18%. Which is a pretty good indicator that people in a position to know expect 18% to not be worth the risk of default or as you mentioned, the printing press devaluing the currency to pay back the debt.

Overall, the smart bet is that the Russian economy is a grenade with the pin already pulled. It's going to detonate if they don't put the pin back in (which means going back on their side of the border, including abandoning Crimea and the Donbas and signing a peace treaty)
 
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