(Bloomberg) -- A diplomatic war is brewing over a chemical weapon attack on British soil, but you wouldn’t know it from looking at Russian markets.
As British Prime Minister Theresa May’s Cabinet meets to discuss how to strike back over the poisoning of a former spy, investors are trading Russian credit-default swaps at close to the lowest price in almost a decade.
The securities, which insure against sovereign default, are typically seen as a gauge of political risk.
“I think there is a sense that May will not do anything very substantive, and Russia is able to resist,” said Tim Ash, a senior emerging market strategist at BlueBay Asset Management LLC in London. “I wonder if that might be an overly sanguine view.”
May announced on Monday that Russian double agent Sergei Skripal and his daughter Yulia had been poisoned with a “military grade” nerve agent known as “Novichok” developed by Russia, and warned of retaliatory measures. U.S. Secretary of State Rex Tillerson called the episode an “egregious act” that would trigger an American response. Russia has rejected the claims as “nonsense.”
Investors polled by Bloomberg on Monday said the standoff is unlikely to affect appetite for Russian assets, or demand for a Eurobond sale planned this month. Russian stocks advanced on Tuesday, while the ruble and local-currency bonds were little changed.
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