Business Maverick: US Treasury Prohibits Investors From Buying Russian Debt

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The US Treasury stepped up financial sanctions on Russia by restricting investors from buying the country’s debt in the secondary market, bringing trading activity almost to a halt on Tuesday as investors scrambled to understand the new restrictions.

means US firms can hold or sell Russian debt, but can’t buy it, according to a spokesperson for Treasury’s Office of Foreign Assets Control. The rules applies to both corporate and sovereign debt as well as equities.

The new measures will come as a further blow to funds holding Russian bonds, as they reduce the number of potential buyers of the assets and undermine any remaining value. The update, which was issued on OFAC’s website late on Monday, caught investors by surprise on Tuesday, prompting many to contact lawyers to determine what the new rules entail, according to people familiar with the matter.

“Markets usually evaporate almost immediately but it’s always good policy to allow wind down for at least some time,” said Brian O’Toole, a former senior adviser at OFAC. “Probably no one will buy the debt but it’s still good policy to let folks offload if they can rather than sticking them immediately with a worthless asset.”

 

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