auction

U.S. Treasury gives green light to Russian default insurance payouts

WASHINGTON (Reuters) -The U.S. Treasury issued a special waiver on Friday to allow investors with insurance against a Russian default, known as Credit Default Swaps, to receive their payouts.

The normally straightforward process of CDS payouts was thrown into chaos in June when Washington said its sanctions on Russia represented a total ban on buying Moscow’s debt.

An investor who buys a CDS contract usually hands over the underlying bond to the bank or fund that sold them the CDS when a default happens. It traditionally involves an auction to determine the price, but under the sanctions that exchange effectively became illegal.

The license authorizes U.S. persons to purchase or receive Russian bonds starting two days before the announced date of the auction, and up to eight business days after the auction takes place.

The committee that sets the auction date has a scheduled meeting on Monday at 1300 GMT after having met three times this week.

“OFAC has issued two General Licenses (waivers) to help U.S. and other global investors more cleanly exit their exposures to Russia,” a Treasury spokesperson said, referring to the Office of Foreign Assets Control which enforces U.S. sanctions.

The move also authorizes financial

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July 30, 2022 by INSURANCE

Sanctions on Russia’s debt entangle default insurance payouts

By Davide Barbuscia and Karin Strohecker

NEW YORK (Reuters) – Investors hit by Russia’s debt default may have to settle some of their positions privately if the U.S. Treasury does not green-light an auction that would allow billions of dollars of insurance to be paid out.

Russia last month defaulted on its international bonds for the first time in decades under the pressure of Western sanctions. While investors have already written down a large part of their debt holdings, an outstanding question is how they can recoup some of those losses through credit default swaps (CDS) – an insurance against defaults. A large chunk of those CDS are held by U.S. bond giant PIMCO.

“If this is not resolved for months and months, maybe there is an opportunity to settle in a private way,” said Yerlan Syzdykov, global head of emerging markets and co-head of emerging markets fixed income at Amundi, who owns both Russia bonds and CDS.

An auction would normally be held to determine the price of the underlying bonds, but the Treasury’s Office of Foreign Assets Control (OFAC) last month banned U.S. investors from buying any Russian securities in secondary markets. That’s clouded the outlook for

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July 10, 2022 by INSURANCE
December 2024
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