Confrontation between Russia and the US increases the risk of default

The derivatives market is signaling that the tug-of-war between the US Treasury and the Kremlin is increasing the likelihood of a default by the Russian government after Russia’s Treasury announced on Wednesday that it will limit the ability of some foreign investors to convert their payments to dollars.

The cost of buying a five-year derivative contract to protect against a Russian government default, also known as a credit default swap, rose to around 75% of the total value of insured debt, according to data from ICE Data Services on Wednesday.