The cost of insurance against default of the Russian Federation has updated the maximum since the period of pandemic panic in the spring of 2020. The growth is associated with geopolitical risks, which increased after the session of negotiations of Russian diplomats on security, Olga Belenkaya, head of the macroeconomic analysis department of FG Finam, explained on January 13.
“The value of 5-year CDS (the cost of insurance against default) for Russia has reached 158 basis points (b.p.) – this is the maximum since the period of global panic in the spring of 2020 due to the first wave of the pandemic. Now such dynamics is uncharacteristic for other emerging markets and is explained by increased geopolitical risks, ”the agency quotes her as saying.Prime“.
She said that the average value of this indicator last year was 93.6 bp, a minimum of 75 bp. was recorded in September. Since mid-December, the indicator has been around 130 bp.
A sharp jump in the indicator on January 13 may be associated with the statement of the Deputy Foreign Minister of the Russian Federation, Sergei Ryabkov, following the results of negotiations with the United States and NATO, which the Kremlin assessed as “unsuccessful.” The news about the bill with the next anti-Russian sanctions, which Foreign Minister Sergei Lavrov called “a nervous breakdown,” could also have affected.
The risk of further escalation between the parties is reflected in the geopolitical premium, the specialist believes.
“According to Russian Foreign Minister Sergei Lavrov, Moscow’s further steps will depend on the West’s reaction to the security proposals formulated earlier by Russia. If there is any progress in this, we can expect a decrease in the geopolitical premium, ”Belenkaya summed up.
A credit default swap, also called default insurance value, allows an investor to insure against default on a third party’s obligations in exchange for regular payments.
Negotiations between Russia and the United States on security guarantees ended in Geneva on January 10, they lasted approximately 7.5 hours. Discussions were held at the US Permanent Mission in a format closed to the press.
Ryabkov assessed the negotiations as complex, lengthy and specific. According to him, the parties did not try to bypass sharp corners. The deputy minister also pointed out that Moscow hopes that NATO will understand the danger of deadlocking the dialogue on security guarantees within the next two days, the alliance should take a step towards Russian proposals.
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