The problem arises after the ban on new investments in Russian assets
The Credit Derivatives Committee (the Credit Derivatives Determination Committee, CDDC) is in discussions with the Office of Foreign Assets Control (OFAC) of the US Treasury about the possibility of temporarily allowing trading in credit default swaps (credit default swaps, CDS) on Russian government bonds. About this on Friday, June 24, writes Bloomberg, citing external sources familiar with the discussion. Committee members include Goldman Sachs, Bank of America, BNP Paribas, Credit Suisse, Deutsche Bank and other mainstream investment banks.
One of the interlocutors of the agency states that OFAC has not yet made a decision to allow such trade and it is unlikely that it will be submitted to the G7 summit, which will be held June 26-28 in Germany. At the same time, OFAC declined to comment, and CDDC did not promptly respond to Bloomberg’s request.
“The first scenario is that the CDDC asks OFAC to extend the expiration date by one day so that we can hold the auction and have to settle the price of the CDS logically. I believe this is a matter of discussion at the moment, but the time is a concern,” Jochen Felsenheimer, managing director of XAIA Investment in Munich, told Bloomberg.
Formerly CDDC acknowledged that Russia had not fully fulfilled its obligation on sovereign Eurobonds, the exclusion from the number of passengers was on April 4 (“Russia-2022”). Bondholders account for bondholders only at the beginning of May. Thus, according to the CDDC, Russia should have paid interest during the grace period – that is, the period between the onset of a technical default and a real default.
However, due to OFAC’s conclusion that US residents are not going to develop new investments in Russia, including including the purchase of securities in the secondary and primary markets, CDDS decided to postpone the decision in the CDS litigation to fulfill obligations on Russian debt.
Reuters, based on JPMorgan calculations, writes that CDS are currently circulating for Russia’s default, on which $1.7 billion can be paid.