In Russia, it is believed that the default of the United States is possible due to refusal to raise the limit on public debt or pay interest.
Russian experts believe that the US default on Debts are two scenarios – medium-term and long-term. Medium-term – for 1-2 years, long-term – in terms of more than 10 years. This was reported by the Russian media with reference to experts.
According to Oksana Kholodenko, head of the analytics and promotion department at BCS World of Investments, the long-term option is more likely, but the issue of its occurrence is related to rare and unpredictable events, the so-called “black swans”. According to her, there are two possible options for US default on debt. The first is the refusal to increase the national debt limit, the second is the refusal to pay interest.
“There is usually a long debate in Congress on raising the debt limit. The issue is usually decided by the deadline. If a positive decision is delayed, a temporary technical procedure for servicing the debt is launched,” the analyst explained.
– risk-free tool. The threat of default on federal debt is a potential negative trigger for investors. At the same time, the actual market reaction may differ from the theoretical one.
“In the event of increased volatility in financial markets and the collapse of the US stock market, the dollar and Treasuries are rising, and their profitability is declining. notes that inflation in the US is “at a 40-year high” – price pressure has lost its temporary status. According to the segment of inflation-protected bonds (TIPS), inflation expectations in the United States for the next 5 years are about 3.3% per annum. According to Kholodenko, this “reduces” the cost of debt service by lowering real interest rates.
Read also: Russia was able to avoid default on Eurobonds – Bloomberg
“Russia's default. What does it mean? “ – read about it in the article Yulia Samaeva for DT.UA. > Default is a non-payment of a loan or violation of the terms of such payment. Sovereign default is when the borrower cannot repay the debts – the state. Most countries regularly take out loans, but they try to avoid sovereign defaults, because then it is difficult to find people willing to lend money. Therefore, every sovereign default is a great event.
