Moody’s opinion is supported by a statement that OFZ sovereign bonds, an instrument similar to Treasury bills, with short maturities that matured on Wednesday, March 2, and were only paid off to holders, after the Russian Central Bank has prohibited payment to foreigners to prevent capital outflows. “The downgrade to Ca is therefore due to serious concern over Russia’s willingness and ability to repay its debt,” Moody’s said. Moody’s view is that the risk of a default has increased significantly and that the likely recovery for investors will be in line with the historical average, consistent with a Ca rating.
This week, financial rating agencies such as Fitch and Moody’s had already lowered their rating to the category of country “at risk” of not paying their debt. It was also joined by the MSCI company that announced that the MSCI Russia index was downgraded from “emerging markets” to “isolated market”.
Moody’s downgraded its long-term Russian debt rating to B3 from Baa3 on March 3 and said it is observing the sanctions imposed by Western countries on Russia. For its part, Fitch lowered it from BBB to B, with a negative outlook. For its part, MSCI reported that the decision to downgrade Russia “will be implemented in all MSCI indices, including standard, custom and derivative indices at a zero price and at the end of 2022.” Such ratings place Russia’s debt in the speculative investment category.
The negative outlook indicated by Moody’s, which poses high risks to Russia’s macroeconomic stability, is due to the following reasons: the imposition of sanctions, financial risks due to delays in sovereign debt repayments, and tensions in the banking and business sectors.
Concerns about governments’ willingness to pay and the unpredictability of government actions could result in higher-than-historical losses for investors, according to Moody’s.
The prohibition of the EU, the United Kingdom and the USA to operate with the central bank is, for now, the main focus of punishment. Moscow has prepared for war and also for economic sanctions, diversifying and hoarding reserves. But without access to Central Bank funds deposited with other central banks, its reserves have plummeted by half, sinking the ruble because the central bank has less ammunition to defend it.
Source: Ambito
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