Problem
Before it invaded Ukraine earlier this year, Russia was considered one of the most credit-worthy countries in the world, given its low debt levels and substantial oil/gas exports. In June of this year, Russia defaulted on part of their foreign currency-denominated debt obligations.
Task
A. Take a look at the yields on the 10Y Russian Government Bond. What might explain some of the volatility you see over the last 5 years?
B. How might information asymmetries impact the yields on government bonds? Do you think this is priced into Russian bond yields? Explain.
C. Why do you think that some investors are currently willing to buy bonds issued by the Russian government?
D. Take a look at the MOEX (Moscow Exchange - https://www.cnbc.com/quotes/.IMOEX). This index tracks the performance of the 50 largest and most liquid Russian companies from 10 main economy sectors, listed on The Moscow Stock Exchange. How does the movement on this exchange compare to the Russian Bond Market over the last 5 years?
E. Do you think there are more or fewer information asymmetries in the Russian Bond market versus the Russian Stock Market? Explain.
F. What could be done to solve these information asymmetries? Who is currently trying to do so?