The Day at a Glance | Jun 27 2022

The Top

*Russia defaults on foreign debt for the first time since 1918.

*G7 leaders meet to discuss new sanctions on Russia; France seeks for Iran and Venezuela oil to return to the market.

*Exports in Mexico increased 0.91% in May (22.4% y/y) and imports did the same in 0.42% (29.1% y/y); the trade deficit amounted to 2,215 million dollars.

*The Ministry of Finance and Public Credit announced a decrease in fiscal stimulus complementary to gasolines implemented since March.

*The Bank of International Settlements warned about a risk of stagflation at a global level in its annual economic report.

*The People`s Bank of China will maintain a policy that will back the economy: Yi Gang, Governor of the Central Bank.

Economic environment

Russia defaults on foreign debt. For the first time in over 100 years, Russia`s government was not able to pay interests on sovereign debt issued in foreign currency in light of the barriers that Western sanctions represent for the country. For several months, Russia had avoided limitations of Western sanctions in order to make payments on debt issued in foreign currency. However, on Sunday, the grace period on about 100 million dollars of snared interest payments expired, a deadline considered an event of default if missed. Given the fact that many rating agencies suspended Russia`s debt valuation since the war, default has not been declared by any international credit rating agency and has only acquired a symbolic nature. Russia`s sovereign debt bonds have decreased considerably since March after the start of the conflict in Ukraine. Russia assured that it has enough to make payments, but that it has been forced into default due to the imposed sanctions. Russia`s total debt in foreign currency amounts to 40 billion dollars. Sanctions on Russia keep the country`s economy in deep contraction and the West is currently assessing new measures against Vladimir Putin`s regime. In G7 meetings, leaders of the Western world are assessing additional sanctions such as banning imports of gold from Russia and setting a price ceiling on Russian oil; even though both measures would be symbolic as trade with Russia has already been reduced in order to avoid violating said sanctions.