Russia’s Creditors May Have To Choose Between Getting Paid In Rubles Or Not Getting Paid At All

Russia’s creditors face the unappetizing prospect of accepting debt payments in rubles after the U.S. Treasury decided Monday to block the Kremlin from using its dollar reserves.

The Russian currency crashed 40% in the days after President Vladimir Putin’s unprovoked attack on Ukraine but has mostly bounced back since. A default on the $636 million debt payment and further sanctions tied to alleged Russian atrocities could trigger another nosedive in the ruble’s value.

“If they can’t get their dollars, either because they’re blocked or Russia won’t pay them, and they are offered rubles and they can get access to them, they’d be smart to take the rubles,” said Jay Newman, a former portfolio manager for Elliott Management who spearheaded the hedge fund’s 15-year battle with the government of Argentina over bond payments. “Rubles at least are worth something.”

The U.S. Treasury froze Russian central bank assets held in the U.S. in February after the invasion of Ukraine, but made an exemption for debt payments that was set to expire on May 25. With Russia continuing its offensive for more than a month, however, and new images showing horrifying scenes of bodies of civilians on the streets of Bucha, Ukraine, the U.S. accelerated that timeline, blocking Russia from making debt payments to investors.

Until then, JPMorgan Chase and BNY Mellon, two New York-based banks, acted as go-betweens for Russian payments to creditors. Putin’s government continued to make payments on time throughout March, most recently with a $447 million coupon payment last week. Both JPMorgan and BNY Mellon declined to comment.

“On the one hand, there’s a sense that if a sanction target wants to use scarce resources to pay U.S. creditors back, why should we object?” said Robert Kahn, director of global macroeconomics at the Eurasia Group. “But if we’re making life easier for them by opening up these doorways, I do think that at moments like this, particularly in the context of the awful images we have seen in the last few days, the interest of creditors is just not given a very high priority.”

The Kremlin dismissed the notion on Wednesday that it’s at risk of not being able to make the payments during a 30-day grace period. Spokesperson Dmitry Peskov said Russia has “all necessary resources to service its debts” and insisted that payments could be paid in rubles if necessary. A U.S.

Treasury spokesperson said the move will deplete the resources Putin is using to continue the war. “Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default,” the Treasury spokesperson said.

If Russia elects not to pay, it wouldn’t be the first time — a 1987 Forbes story covered a 96-year-old woman who was still waiting to be paid for czarist bonds her husband had bought in 1919 shortly after Russia defaulted on its debt during the Bolshevik Revolution.

Anton Siluanov, Russia’s minister of finance, said on state TV in March that about $300 billion of the country’s $640 billion in gold and foreign reserves has been frozen by sanctions. If Russia still has access to about $340 billion in reserves, the country appears to have more than enough to cover its total of $40 billion owed in international bonds, but Kahn said it’s not that simple and expects defaults to begin in the coming weeks.

“Dollars in a Chinese bank or gold in Moscow may be in principle unblocked, but it’s hard for them to take those and use them to buy the things they need,” Khan said. “My sense is that the usable reserves are really far lower than what the minister said.”

Russia will still be able to use revenue from sales of commodities like wheat, palladium and oil to meet its debt obligations. The U.S. has blocked imports of Russian oil, but other importing countries haven’t followed suit.

Meanwhile, trading in dollar-denominated Russian corporate bonds has skyrocketed, with investors hunting for bargains despite the reputational risk. The average daily value of trades as of March 24 was double the same period a year before and the most in two years, according to Bloomberg.

I’m a reporter on Forbes’ money team covering the wealthiest people and most influential firms on Wall Street. I’ve reported on the world’s billionaires for Forbes’ wealth team and was

Source: Russia’s Creditors May Have To Choose Between Getting Paid In Rubles Or Not Getting Paid At All

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‘Market Is Not Quite Ready’—Bitcoin Billionaire Issues A Serious Crypto Warning As The Price Of Ethereum, BNB, Solana, Cardano, XRP And Luna Suddenly Crash

Bitcoin and cryptocurrency prices have bounced back this week, riding a wave of positive news even as researchers warn of crypto thefts.

The bitcoin price came within touching distance of $50,000 per bitcoin but has today dropped back, losing more than $2,000 per bitcoin in a matter of hours. Ethereum has also erased its latest gains, despite traders eagerly eyeing a long-awaited upgrade.

Now, after El Salvador last week postponed its controversial $1 billion bitcoin-backed bond, outspoken bitcoin billionaire Michael Saylor has warned the market perhaps isn’t “quite ready” for bitcoin bonds.

“I’d love to see a day where people eventually sell bitcoin-backed bonds like mortgage-backed securities,” Saylor, the chief executive of business intelligence software company MicroStrategy, which has pivoted to become a bitcoin acquisition vehicle over the last two years, told Bloomberg in an interview. “The market is not quite ready for that right now. The next best idea was a term loan from a major bank.”

Last week, El Salvador, which became the world’s first country to adopt bitcoin as legal tender last year, revealed it had postponed its planned $1 billion bitcoin bond offering with the country’s finance minister Alejandro Zelaya blaming unfavorable market conditions—but El Salvador’s president Nayib Bukele blaming the delay on necessary pension reforms.

“I think this is not the time,” Zelaya said in comments reported by Reuters, with Russia’s invasion of Ukraine unsettling markets in recent weeks. “In May and June sometimes you can, but the market variables get different. After September, it is difficult to raise, unless you are previously funded, as in the case of bitcoin bond.”

The hotly-anticipated bitcoin bond, designed to fund the creation of an ultra-low tax bitcoin city in El Salvador, will have a “substantial oversubscription” that could reach $1.5 billion, according to Zelaya. Half of the funds raised will be used by the country to buy more bitcoin and the rest earmarked to develop bitcoin mining infrastructure powered by a volcano.

Earlier this week, MicroStrategy announced it’s bitcoin-focused subsidiary MacroStrategy had taken on a $205 million loan to buy more bitcoin, adding to its 125,000 bitcoin hoard. MicroStrategy stock price, up some three-fold since it first began buying bitcoin, has slide 6% this week.

The loan will give MicroStrategy “an opportunity to further our position” as the largest publicly-traded bitcoin investor, Saylor said in a statement.

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk

Source: ‘Market Is Not Quite Ready’—Bitcoin Billionaire Issues A Serious Crypto Warning As The Price Of Ethereum, BNB, Solana, Cardano, XRP And Luna Suddenly Crash

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Critics:

MicroStrategy CEO and Bitcoin permabull, Michael Saylor believes that traditional financial markets aren’t quite ready for Bitcoin-backed bonds. Saylor told Bloomberg on Tuesday, that he’d love to see the day come where Bitcoin-backed bonds are sold like mortgage-backed securities, but warned that, “the market is not quite ready for that right now. The next best idea was a term loan from a major bank.”

The remarks come two days after MicroStrategy’s (MSTR) Bitcoin-specific subsidiary MacroStrategy, announced that it had taken out a $205 million Bitcoin-collateralized loan to purchase even more Bitcoin. This loan was unique, as it marked MicroStrategy’s first time borrowing against its own Bitcoin reserves — which are currently valued at approximately $6 billion — to buy more of the cryptocurrency.

Saylor’s comments also follow El Salvador’s recent decision to postpone the issuance of its $1 billion dollar Bitcoin-backed “Volcano Bond” on March 23rd. According to El Salvador’s Finance Minister Alejandro Zelaya, the decision to delay the bond was due to general financial uncertainty in the global market driven by conflict in Ukraine.

In a potential warning to El Salvador, Saylor said that the country’s Volcano Bond was somewhat more risky than his company’s Bitcoin-collateralized loan,Saylor added that he remains extremely bullish on the long-term potential for Bitcoin-based bonds, going as far to say that it would be a good idea for cities like New York to use Bitcoin as a debt instrument.

Related: MicroStrategy CEO won’t sell $5B BTC stash despite crypto winterSince its initial $250-million Bitcoin investment in August 2020, MicroStrategy has now amassed a substantial 125,051 BTC — which at the current price of $44,547 equates to $5.5 billion. MicroStrategy has made a series of separate BTC purchases using the company’s cash on hand as well as the proceeds of sales of convertible senior notes in private offerings to institutional buyers.

Saylor’s actions have gradually transformed MicroStrategy into a partly leveraged Bitcoin holdings company, with MSTR shares closely correlated with the price of Bitcoin.

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US Treasury To Allow Russia Bond Payment To Go Through In Dollars

Russia says it made a $117 million bond payment — a move to avoid defaulting on its debt — and the US Treasury Department said it would allow the installment.

Russia’s finance minister told state-run media Thursday that the country fulfilled a debt obligation, and noted that it’s up to the US as to whether the payment would be allowed. The Treasury said it would let the payment go through.

Reuters reported Thursday that correspondent bank JPMorgan received the payment and made a credit to the paying agent Citigroup, which is responsible for distributing the money to investors.

Representatives from Citigroup and JPMorgan declined to comment on the matter. A report from Bloomberg said Russia’s finance ministry ordered the interest payment on Monday, ahead of its Wednesday due date.

US sanctions on doing business with Russia’s central bank and other institutions won’t block Moscow from making payments to Americans on dollar-denominated debt until just after midnight on May 25, a Treasury spokesperson told Bloomberg.

Russia earlier said if its dollar payments weren’t allowed, it would repay its foreign debt in rubles. Credit ratings agency Fitch said that could amount to a default as investors expected to be paid in dollars.

So far, the bondholders haven’t received the bond payments yet, sources told Reuters.

Russia has been teetering on its first foreign-currency bond default since 1918, during the aftermath of the Bolshevik Revolution. The $117 million interest payment on two dollar bonds was a key test for a country whose credit rating was recently slashed to junk from investment-grade.

Putin’s forces launched a full-scale attack on Ukraine last month, unleashing a wave of sanctions from the West that have largely cut off Russia from global financial markets and blocked it from accessing about half of its $640 billion in foreign currency reserves.

By:

Source: US Treasury to Allow Russia Bond Payment to Go Through in Dollars

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Critics:

Russian Finance Minister Anton Siluanov told Russia state-run media outlet Russia Today that the country fulfilled its obligations to foreign creditors, though he added that the payments may not go through since they’re at risk of being blocked by the US.

A spokesperson for the US Treasury Department told The Post that Washington would allow the payments to go through.

Siluanov claimed the “possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us.” Siluanov said the US and EU sanctions have frozen some $315 billion worth of foreign reserves.

If the US blocks the payment, Russia could try to pay in rubles, but the currency has been so devalued that the country would have no choice but to default on its debt, according to credit ratings agency Fitch.

Dmitry Peskov, the spokesperson for the Kremlin, said any default would be “entirely artificial” since Russia had the money to fulfill its debt obligations.

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Omicron Job Loss? Unemployment Claims Unexpectedly Spike One Week After Steep Drop In Jobless Benefits Numbers

The number of new unemployment claims unexpectedly jumped for the second week in a row this month, despite a steep drop in the overall number of Americans receiving unemployment benefits just one week earlier—a concerning sign for the labor market recovery after experts warned a record surge in coronavirus cases—spurred by the rapidly spreading omicron variant—could slow the economic recovery.

About 230,000 people filed initial jobless claims in the week ending January 8, an increase of 23,000 from the previous week, according to the weekly data released Thursday. Economists were only expecting about 200,000 new claims last week, according to Bloomberg data.

“This may well be the first report suggesting Omicron is leading to new job loss,” Bankrate senior economic analyst Mark Hamrick wrote in a Thursday note, pointing out the largest increases were reported in California and New York, where new claims totaled more than 20,000 combined.

The new report also showed the number of Americans receiving unemployment benefits fell to less than 1.6 million in the week ending January 1, a decrease of 194,000 from the previous week and the lowest level since June 1973.

“The future path of the pandemic remains highly uncertain, but the underlying job market narrative overall continues be one of scarcity of available applicants and workers,” Hamrick said. “The latest wrinkle, the high level of individuals testing positive, becoming ill or staying away from work, has added to supply chain disruptions with inflation already running red-hot.”The new unemployment data comes after a disappointing labor report on Friday showed the U.S. added a lower-than-expected 199,000 jobs in December.

After the report, Hamrick said it was still “difficult to measure” the economic impact of the omicron variant at that point and cautioned against dismissing its potential, pointing out widespread worker shortages, stoked in part by lingering concerns over the pandemic, remain a big uncertainty.

Economists surveyed by Bankrate said the variant could weigh on job growth in the first three months of the year, but estimated the unemployment rate will fall from 3.9% to 3.8% in a year. Moody’s Analytics’ Mark Zandi shared a similar word of caution, saying, “Risks are rising,” and forecasting that the economic recovery “is set to turn soft” as omicron stunts business. Amid the latest surge, credit card spending and restaurant bookings have already dropped substantially, while widespread flight cancellations have been another economic concern, Zandi notes.

According to the Labor Department, the U.S. has thus far recovered about 80% of the 20.5 million jobs U.S. employers cut between March and April of last year.

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I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I

Source: Omicron Job Loss? Unemployment Claims Unexpectedly Spike One Week After Steep Drop In Jobless Benefits Numbers

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Nasdaq To Move Markets to Amazon’s Cloud

Nasdaq Inc. said that next year it plans to begin moving its North American markets to Amazon. com Inc.’s Amazon Web Services cloud-computing platform.

The move, which will take a phased approach starting with Nasdaq MRX, a U.S. options market, involves turning over massive amounts of the exchange operator’s data to a third-party cloud service. Nasdaq didn’t disclose a timeline for moving its other markets.

Nasdaq’s ambition is to become “one hundred percent cloud-enabled,” Adena Friedman, the company’s chief executive, said in announcing the move Tuesday at an AWS industry conference in Las Vegas. “We will follow with more of our markets as we work closely with clients,” Ms. Friedman said.

Nasdaq has previously said that all of its more than 25 markets will be hosted in the cloud within the next decade.

They include six equity markets in North America, including the Nasdaq Stock Market, as well as six equity derivative markets, the Nasdaq Baltic and Nasdaq Nordic markets, and fixed-income and commodity markets.

The financial-services sector has been slower to adopt cloud computing than other industries, stemming in part from the tight regulatory oversight of banks and exchanges, as well as concerns over breaches of sensitive client data.

“To the extent that they don’t disintermediate their trading partners and investors, moving to the cloud gives exchanges greater flexibility, as well as enables more people to connect, enables people to connect easier,” said Larry Tabb, head of market-structure research at Bloomberg Intelligence.

Earlier this month, CME Group Inc. and Alphabet Inc.’s Google struck a deal to move CME’s core trading systems to the cloud.

Nasdaq already stores billions of transaction records in a data warehouse operated by AWS, including daily orders and quotes transmitted by traders. Over the years, the company has migrated a number of services to AWS, including its revenue management system for the U.S. and European markets. Its existing relationship with AWS is a big reason Nasdaq said it chose the Amazon.com unit to host its markets.

“We have had a longstanding relationship with them,” said Brad Peterson, Nasdaq’s chief technology and information officer.

Cloud systems and apps are hosted on data centers operated by third-party providers, including tech giants such as Amazon.com, Microsoft Corp. and Alphabet Inc.’s Google. The systems enable users to rapidly scale computing needs, based on demand, with far greater ease than in their own data centers.

Mr. Peterson has credited cloud systems for keeping Nasdaq from suspending trading in January, when a frenzy for shares of GameStop Corp. and a handful of other companies flooded popular online brokerages, caused a spike in market volatility and forced many operators to restrict access to trading.

He said moving markets to the cloud has the potential to provide the exchange with more security, greater reliability and better scalability, or the ability to quickly power up computing resources. Nasdaq and AWS could also create new cloud-based products and services for Nasdaq’s customers, Mr. Peterson said.

Scott Mullins, head of world-wide financial services business development at AWS, said Nasdaq’s growing use of cloud systems is driven by a need for elasticity and resilience to handle market volatility, along with hundreds of billions of trading events every day. “If you’re doing that on customized hardware, you’re going to have to guess what your capacity needs to be,” Mr. Mullins said.

The two companies have been working together to build out Nasdaq’s cloud-based capabilities since about 2012, Mr. Mullins said. “If you get a bill from Nasdaq today, it’s coming from a data lake sitting in AWS,” Mr. Mullins said.

“We’re only going to do it at a pace that works for us, AWS and our clients,” said Tal Cohen, executive vice president and head of North American markets at Nasdaq.

Ms. Friedman said the move announced Tuesday centers on the exchanges’ matching engines, systems that connect buyers and sellers and handle a vast number of price quotes and trades, many submitted by high-speed trading firms accustomed to having the exchange’s systems process orders in millionths of a second.

Mr. Peterson said that in the first phase of the move, Nasdaq’s primary data center for its U.S. equities and options markets in Carteret, N.J., will be expanded and AWS will install computing resources there. Traders will be allowed to connect their servers to AWS servers the same way they currently connect to Nasdaq’s servers, he said.

By: John McCormick & Angus Loten

Source: Nasdaq to Move Markets to Amazon’s Cloud – WSJ

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