Saudi Press

Saudi Arabia and the world
Friday, Apr 03, 2026

Wall Street is betting on Russian debt

Wall Street is betting on Russian debt

US banks have left Russia, but that doesn't mean they're done making money off the Kremlin's horrific invasion of Ukraine.

The sell-off of Russian debt associated with Russian President Vladimir Putin's campaign on Ukraine and the sanctions that have ensued have created a window for a new type of arbitrage that some in the finance world are gobbling up, seeing it as easy money.

The idea is what's known as a negative-basis trade, or purchasing dirt-cheap Russian government or corporate bonds along with credit-default swaps which act as insurance on the potential default of a borrower.

Normally this type of trade doesn't make sense, but as institutional investors look to quickly rid their portfolios of anything Russia-related, bond prices fell faster than the price to hedge them rose.

The volume of trading in Russian corporate debt has risen to a two-year high since Russia invaded according to Bloomberg News.

Data from the website MarketAxess shows that Russian sovereign debt traded at a volume of $7 billion between February 24 and April 7, up from $5 billion in the same period in 2021 -- a 35% uptick.

Russian bonds are trading furiously, said Philip M. Nichols, an expert on Russia and social responsibility in business and professor at the University of Pennsylvania's Wharton School. "There's a lot of speculators that are buying up these bonds that have been severely downgraded and are on the verge of becoming junk," he said.

Nichols says he's getting constant calls from analysts interested in the whether the potential trade makes sense. "The spread on Russian sovereign debt is astonishing right now," he said. "They're making an unusual amount of money with respect to the volume."

The cost to insure Russian debt grew to 4,300 basis points on April 5, up from 2,800 the previous day.

At the same time bond rates fell drastically -- with bonds maturing in 2028 trading at just $0.34 on the dollar. That means it could cost just over $4 million to insure $10 million of Russian securities, The Economist reported.

Hedge funds like Aurelius Capital Management, GoldenTree Asset Management and Silver Point Capital have increased their exposure to Russian markets, mostly by purchasing corporate bonds, the Financial Times reported in late March.

US financial institutions like JPMorgan Chase and Goldman Sachs are facilitating these trades, connecting clients who want to get out of their positions with hedge funds that have a higher risk tolerance for risk and less of a moral quandary about purchasing Russian debt.

"This is Wall Street," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research. "It doesn't surprise me that they saw some sort of a loophole they could exploit to make money."

JPMorgan representatives say they are acting as middlemen, simply looking to aid clients. "As a market-maker, we have been helping clients reduce their risks and manage their exposures to Russia in the secondary markets. None of the trades violate sanctions or benefit Russia," said a spokesperson.

If clients wanted to quickly unload their exposure to Russia they could look to Russian oligarchs who would happily buy back sovereign bonds, said Robert Tipp, chief investment strategist and head of Global Bonds at PGIM Fixed Income. Selling Russian debt to US hedge funds, keeps any accrued interest out of Russian hands.

The trades are legal and lucrative, said Nichols, but highly speculative and subject to large swings based on news of Russia's invasion of Ukraine and further sanctions.

It also illustrates an alarming disconnect between Wall Street and the actual state of the global economy: Typically, investors would base their valuation of Russian debt on whether or not it will be repaid, and the likelihood that it would be repaid would depend on the strength and durability of the Russian economy, but that's not happening. New sanctions by the US Treasury on Tuesday, which blocked Russian access to any dollars they held in American banks, significantly increased the chances that Russia would default on its debt and that its gross domestic product, the main measure of a country's economic strength, would tumble.

The US Congress voted this week to remove Russia's most favored nation's trade status, a major economic downgrade that would pave the way for deeper sanctions and import controls on products essential to Russia like chemicals and steel.

The removal of that status, said Nichols, would sever Russia's integration into the global economy. If Wall Street were associated with the real world, he added, it wouldn't want to be anywhere near Russian debt.

"Russian debt is the province of high risk takers," said Nichols, "and institutions should probably stay away."

Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Saudi Film Festival Rescheduled to Summer as Regional Tensions Continue
Saudi Arabia Reports Forty Two Point Six Billion Dollars in Foreign Tourist Spending in 2025
Saudi Crown Prince and Russian President Hold Strategic Call on Escalating Regional Crisis
Saudi Arabia Advances Rail Network as Strategic Alternative to Strait of Hormuz Shipping Route
Ruanyun Edai Launches Saudi Arabia Hub With Forecast of Ten Percent Revenue Growth
Greek Defence Minister Visits Troops in Saudi Arabia Following Successful Missile Interception
Saudi Arabia Expands Global Strategy With Focus on African Critical Minerals
SpaceX Explores Potential Five Billion Dollar Investment From Saudi Fund Ahead of Possible IPO
US Central Command Dismisses Iranian Claim of Mass Casualties Among American Personnel in Saudi Arabia
Co-Diagnostics to Establish Molecular Diagnostics Facility in Saudi Arabia Through Joint Venture
Trump Engages Saudi Crown Prince in Talks on Potential Iran Ceasefire
Saudi Arabia’s Sadara Suspends Operations as Supply Chain Disruptions Intensify
Saudi Arabia Accelerates Energy Shift by Trading Oil Revenues for Battery Investments
Saudi Arabia Introduces Flexible Options for Expired Visas Amid Regional Disruptions
Online Narratives Surge as Iran–US Tensions Spill Into Digital Arena Following Trump Remarks
Saudi Arabia Urges Trump to Seize Strategic Moment as UAE Weighs Ground Deployment
Saudi Arabia Redirects Nearly One Million Barrels of Oil Daily Away from Strait of Hormuz
Saudi Arabia Carries Out Execution of Businessman Linked to 2011 Qatif Unrest
Ukraine–Saudi Defense Pact Signals Rising Demand for Battlefield Expertise
Saudi Arabia Balances Diplomacy and Defense Preparedness Amid Iran Conflict
Iran Conflict Reshapes Strategic Calculations in U.S.-Saudi Relations
Saudi Arabia Voices Caution as Trump’s Assertive War Strategy Reshapes Regional Dynamics
Saudi Arabia Updates Travel Advisory as Regional Conflict Intensifies
Saudi Arabia’s Sadara Suspends Petrochemical Production as Conflict Disrupts Operations
Iran Urges Saudi Arabia to Remove US Forces Amid Escalating Regional Tensions
Gulf Allies Urge Trump to Sustain Campaign Until Iran Is Fully Defeated
Saudi Arabia Unveils Strategic Rail Freight Corridors Connecting Gulf Ports to Jordan
Saudi Arabia Intercepts Drones and Ballistic Missiles in Major Defensive Operation
Houthi Escalation Opens New Front in Expanding Iran-Linked Conflict
Major Saudi Chemical Plant Halts Operations Amid Regional Conflict Disruptions
Strike on US Radar Aircraft in Saudi Arabia Signals Escalating Threat Capabilities
US Citizens in Saudi Arabia Advised to Shelter Indoors Amid Rising Regional Tensions
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Saudi Arabia Urges Trump to Lead Strategic Reset in Middle East as UAE Weighs Ground Role
Reed Smith Expands Saudi Presence with Senior Corporate Appointments
Trump Announces Approval of F-35 Fighter Jet Sale to Saudi Arabia
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
Ukraine Secures Defense Agreements with Qatar and Saudi Arabia as UAE Talks Advance
Oil Prices Surge as Saudi Arabia Adjusts Supply Amid Escalating Iran Tensions
Saudi Arabia Condemns Attacks on Kurdistan Leaders and Reaffirms Backing for Iraq’s Stability
Saudi Arabia Weighs Strategic Interests as Iran Conflict Raises Regional Stakes
Severe Thunderstorms Sweep Across UAE and Saudi Arabia Bringing Heavy Rainfall
Trump’s Strategic Alignment with Saudi Arabia Reflects Expanding Economic and Diplomatic Synergy
Saudi Arabia Strongly Condemns Attacks on Presidential Residences in Hawler
Saudi Stocks Edge Lower as Tadawul Index Closes Slightly Down
Houthis Enter Expanding Iran Conflict as US Deploys Additional Troops
Iran Seeks Assurances for Regional Allies as Saudi Arabia Presses for Firm Security Guarantees
Iranian Strike Reportedly Destroys $270 Million US E-3 Sentry Aircraft at Saudi Air Base
Iranian Strike on Saudi Base Leaves Ten American Personnel Injured
Ukraine Claims Russia Shared Satellite Intelligence with Iran Ahead of Saudi Base Strike
×