Wall Street Is Pouncing on Russia’s Cheap Corporate Debt

Post Reply New Topic

As the U.S. and allies tighten sanctions on Russia and choke off investor demand for its assets, parts of Wall Street are jumping on the buying opportunity that it’s creating.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. have been purchasing beaten-down company bonds tied to Russia in recent days, as hedge funds that specialize in buying cheap credit look to load up on the assets, according to people with knowledge of the private transactions.

Banks routinely scoop up debt because clients asked them to, or because they expect to find ready buyers.
Finding ways to wager on distressed securities is standard fare on Wall Street. But doing so in the wake of Russia’s widely condemned invasion of Ukraine brings unique risks. World leaders are seeking to punish some Russian companies and cut the country off from the global financial system, and any firm perceived as working against those interests faces potential reputational damage, market watchers say.

“The whole point of the sanctions is to make them and their instruments untouchable,” said Athanassios Diplas, a veteran derivatives trader who was at Goldman Sachs during the 1998 Russian financial crisis. “I have no issues looking at arbitrage opportunities in distressed situations, like back in 1998. But this is different.”