Beautiful Virgin Islands

Monday, Mar 02, 2026

Wall Street is betting on Russian debt

Wall Street is betting on Russian debt

US banks have left Russia, but that doesn't mean they're done making money off the Kremlin's horrific invasion of Ukraine.

The sell-off of Russian debt associated with Russian President Vladimir Putin's campaign on Ukraine and the sanctions that have ensued have created a window for a new type of arbitrage that some in the finance world are gobbling up, seeing it as easy money.

The idea is what's known as a negative-basis trade, or purchasing dirt-cheap Russian government or corporate bonds along with credit-default swaps which act as insurance on the potential default of a borrower.

Normally this type of trade doesn't make sense, but as institutional investors look to quickly rid their portfolios of anything Russia-related, bond prices fell faster than the price to hedge them rose.

The volume of trading in Russian corporate debt has risen to a two-year high since Russia invaded according to Bloomberg News.

Data from the website MarketAxess shows that Russian sovereign debt traded at a volume of $7 billion between February 24 and April 7, up from $5 billion in the same period in 2021 -- a 35% uptick.

Russian bonds are trading furiously, said Philip M. Nichols, an expert on Russia and social responsibility in business and professor at the University of Pennsylvania's Wharton School. "There's a lot of speculators that are buying up these bonds that have been severely downgraded and are on the verge of becoming junk," he said.

Nichols says he's getting constant calls from analysts interested in the whether the potential trade makes sense. "The spread on Russian sovereign debt is astonishing right now," he said. "They're making an unusual amount of money with respect to the volume."

The cost to insure Russian debt grew to 4,300 basis points on April 5, up from 2,800 the previous day.

At the same time bond rates fell drastically -- with bonds maturing in 2028 trading at just $0.34 on the dollar. That means it could cost just over $4 million to insure $10 million of Russian securities, The Economist reported.

Hedge funds like Aurelius Capital Management, GoldenTree Asset Management and Silver Point Capital have increased their exposure to Russian markets, mostly by purchasing corporate bonds, the Financial Times reported in late March.

US financial institutions like JPMorgan Chase and Goldman Sachs are facilitating these trades, connecting clients who want to get out of their positions with hedge funds that have a higher risk tolerance for risk and less of a moral quandary about purchasing Russian debt.

"This is Wall Street," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research. "It doesn't surprise me that they saw some sort of a loophole they could exploit to make money."

JPMorgan representatives say they are acting as middlemen, simply looking to aid clients. "As a market-maker, we have been helping clients reduce their risks and manage their exposures to Russia in the secondary markets. None of the trades violate sanctions or benefit Russia," said a spokesperson.

If clients wanted to quickly unload their exposure to Russia they could look to Russian oligarchs who would happily buy back sovereign bonds, said Robert Tipp, chief investment strategist and head of Global Bonds at PGIM Fixed Income. Selling Russian debt to US hedge funds, keeps any accrued interest out of Russian hands.

The trades are legal and lucrative, said Nichols, but highly speculative and subject to large swings based on news of Russia's invasion of Ukraine and further sanctions.

It also illustrates an alarming disconnect between Wall Street and the actual state of the global economy: Typically, investors would base their valuation of Russian debt on whether or not it will be repaid, and the likelihood that it would be repaid would depend on the strength and durability of the Russian economy, but that's not happening. New sanctions by the US Treasury on Tuesday, which blocked Russian access to any dollars they held in American banks, significantly increased the chances that Russia would default on its debt and that its gross domestic product, the main measure of a country's economic strength, would tumble.

The US Congress voted this week to remove Russia's most favored nation's trade status, a major economic downgrade that would pave the way for deeper sanctions and import controls on products essential to Russia like chemicals and steel.

The removal of that status, said Nichols, would sever Russia's integration into the global economy. If Wall Street were associated with the real world, he added, it wouldn't want to be anywhere near Russian debt.

"Russian debt is the province of high risk takers," said Nichols, "and institutions should probably stay away."

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
Barclays and Jefferies Shares Fall After UK Mortgage Lender Collapse Rekindles Credit Market Concerns
Play Exploring Donald Trump’s Rise to Power by ‘Lehman Trilogy’ Author to Premiere in the UK
Man Arrested After Churchill Statue Defaced in Central London
Keir Starmer Faces Political Setback as Labour Finishes Third in High-Profile By-Election
UK Assisted Dying Bill Set to Fall Short in Parliament as Regional Initiatives Gain Ground
UK Defence Ministry Clarifies Position After Reports of Imminent Helicopter Contract
Independent Left-Wing Plumber Secures Shock Victory as Greens Surge in UK By-Election
Reform UK Refers Alleged ‘Family Voting’ Incidents in By-Election to Police
United Kingdom Temporarily Withdraws Embassy Staff from Iran Amid Heightened Regional Tensions
UK Government Reaches Framework Agreement on Release of Mandelson Vetting Files
UK Police Contracts With Israeli Surveillance Firms Spark Debate Over Ethics and Oversight
Spain to Conduct Border Checks on Gibraltar Arrivals Under New Post-Brexit Framework
Engie Shares Jump After $14 Billion Agreement to Acquire UK Power Grid Assets
BNP Paribas Overtakes Goldman Sachs in UK Investment Banking League Tables
Geothermal Project to Power Ten Thousand Homes Marks UK Renewable Energy Milestone
UK Visa Grants Drop Nineteen Percent in 2025 as Migration Controls Tighten
Barclays and Jefferies Among Banks Exposed to Collapse of UK Mortgage Lender MFS
UK Asylum Applications Edge Down in 2025 Despite Rise in Small Boat Crossings
Jefferies Reports Significant Exposure After Collapse of UK Lender MFS
FTSE 100 Reaches Fresh Record Highs as Major Share Buybacks and Earnings Lift London Stocks
So, what's happened is, I think, government policy, not just under Labour, but under the Conservatives as well, has driven a lot of small landlords out of business.
Larry Summers, the former U.S. Treasury Secretary, is resigning from Harvard University as fallout continues over his ties to Jeffrey Epstein.
U.S. stocks ended higher on Wednesday, with the Dow gaining about six-tenths of a percent, the S&P 500 adding eight-tenths of a percent, and the tech-heavy Nasdaq climbing roughly one-and-a-quarter percent.
From fears of AI-fuelled unemployment to Big Tech's record investment, this is AI Weekly.
Apple just dropped iOS 26.4.
US Lawmakers Seek Briefing from UK Over Reported Encryption Order Directed at Apple
UK Business Secretary Calls on EU to Remove Trade Barriers Hindering Growth
Legal Pathways for Removing Prince Andrew from Britain’s Line of Succession Examined
PM Netanyahu welcome India PM Narendra Modi to Israel
Shadow Diplomacy: How Harry and Meghan’s Jordan Trip Undermines the Monarchy
Britain’s Channel Crisis: Paying Billions While the Boats Keep Coming
Downing Street’s Veteran Deception Scandal
UK HealthCare Expands ‘Food as Health’ Initiative Statewide to Tackle Chronic Illness in Kentucky
Leonardo Chief Says UK Set to Decide on New Medium Helicopter Programme
UK Slows Chagos Islands Agreement After Concerns Raised in Washington
European and UK Stock Markets Reach Fresh Highs as Banks and Miners Lead Rally
UK Government Insists Chagos Islands Negotiations Continue After Minister’s ‘Pause’ Remark
No Confirmed Deal for Engie to Acquire UK Power Networks Amid Market Speculation
UK Reaffirms Updated Entry Requirements for Travellers as of February 25, 2026
Lord Mandelson Condemns Arrest as Driven by ‘Baseless Suggestion’ He Would Flee Abroad
Former UK Ambassador Released on Bail Following Arrest in Epstein-Linked Investigation
UK Parliament Orders Release of Former Prince Andrew’s Government Vetting Files
Reddit Fined £14 Million by UK Regulator Over Failures in Age Verification Controls
×