The latest sanctions imposed on Russia by the U.S. over Ukraine are threatening to tip the nation into a recession as they exacerbate a bond sel-loff and drive credit risk higher.
Yesterday’s 36 basis-point jump in Russia’s August 2023 ruble bond, the most among 24 emerging markets, extended this month’s increase to 59 basis points. Credit default swaps insuring the nation’s debt against non-repayment climbed 26 basis points to a two-month high.
Bonds, stocks and the ruble tumbled after the U.S imposed the most aggressive sanctions yet on Russian companies to punish President Vladimir Putin for refusing to end his support for Ukrainian rebels.
Restricting access to financing for companies including oil producer OAO Rosneft and OAO Gazprombank, the country’s third-biggest lender, will probably push the economy into a recession, said Riedel Research Group Inc. in New York.