Russian Markets Take a Hit as Biden Vows Putin Will Pay a Price

The ruble retreated, bond yields climbed and the cost of protecting Russia’s debt against default jumped after U.S. President Joe Biden promised the Kremlin would pay a price for election meddling.

Biden’s comments to ABC News -- in which he agreed Vladimir Putin was a “killer” -- sent the Russian currency down the most in three weeks. The prospect of additional penalties as soon as next week revived concerns that the nation’s sovereign debt could eventually be targeted.

Russian Markets Take a Hit as Biden Vows Putin Will Pay a Price

At the same time, the Finance Ministry placed all 30 billion rubles ($406 million) of bonds offered at an auction after the reports, and a subsequent tender of inflation-linked debt also sold out. A report by CNN suggested the penalties could be linked to individuals close to Putin, something investors view as much less critical for Russia’s investment case.

“The market will gradually recover from its initial reaction,” said Sofya Donets, an analyst at Renaissance Capital in Moscow. Any new sanctions would likely be limited to restrictions on certain officials or state companies, she said.

Asked in the ABC interview if he believes Putin is “a killer,” Biden murmured agreement and said “I do,” without elaborating. His comments come after the U.S. imposed penalties on Russian officials at the start of the month in response to the poisoning and jailing of opposition leader Alexey Navalny.

The threat of tougher restrictions has hung over holders of ruble debt, known as OFZs, for years, but after several false alarms, most investors no longer see it as a base case. Washington has stopped short of the measure in the past amid warnings it could destabilize global markets.

Market Snapshot:

  • The ruble was trading 1.3% weaker at 73.79 per dollar as of 5:08 p.m. in Moscow after sinking as much as 1.6% earlier, the biggest drop since Feb. 25
  • Yields on 10-year ruble bonds were up 3 basis points at 6.84%, near their highest in a year
  • Credit default swaps rose 11 basis points to 100 basis points, the largest increase in a week and a half
  • The benchmark MOEX stocks index was on track to end a four-day winning streak, sinking 2.3%

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