Russia’s central bank has cautiously resumed bond trading on the Moscow Exchange after the country invaded Ukraine.
Russia’s central bank cautiously resumed bond trading on the Moscow Exchange on Monday as the country invaded Ukraine, reduced the value of Russia’s ruble-denominated government debt and sent higher borrowing costs.
Stock trading was closed, with no word on when it might reopen.
The central bank has bought bonds to support the price. The bank has imposed severe restrictions on financial transactions in an effort to stabilize the market and to combat a sharp fall from Western sanctions, which have sharply devalued the ruble against the US dollar and the euro.
Rating agencies have downgraded Russian bonds to “junk” status, and the head of the International Monetary Fund has said defaults on government debt are no longer “unlikely.” Russia’s finance ministry last week flirted with defaulters by threatening to pay foreign bond holders of heavily devalued rubles in dollar bonds before sending money in dollars.
However, it missed another interest payment for foreign investors earlier this month, which could lead to the government declaring it as default after the 30-day grace period expires. The Russian government sent the ruble loan money to a government depository account instead of bondholders.
The government relies heavily on domestic Russian banks for most of its loan needs.
The RGBI index on government debt fell 9.4%, the Tass News Agency reported, pushing interest rates on 1-2-year bonds to 19.5% and 18.1% for 10 years.
The central bank said in a statement on its website that the bonds it bought would be disposed of later so as not to affect the bank’s monetary policy.
The stock last traded on February 25, the day after the attack, and the major stock index was sent sharply lower. The central bank has said that the announcement of transactions in other sections of the exchange instead of bonds will be made later.