Russian debt default odds jump to 90% while Yellen confirms a report the US will likely block bond payments

• A spike in the cost of insurance on Russian debt implied a 90% probability Wednesday the Kremlin will miss bond payments within a year.
• That's up from 77% on Tuesday, according to ICE Data Services.

A spike in the cost of insurance on Russian debt implied a 90% probability Wednesday the Kremlin will miss bond payments within a year.

That's up from 77% on Tuesday, Bloomberg reported, citing ICE Data Services, which tracks insurance on debt meant to protect investors.

The surge comes as investors contemplate the likelihood of the Biden administration blocking bond payments from Russia to US holders, putting Moscow closer to its first sovereign debt default in nearly 100 years.

The increased default risk is tied to a sanctions waiver from the US Treasury Department's Office of Foreign Asset Control that has thus far allowed the Kremlin to pay off dollar-debt obligations.

But on Tuesday, sources told Bloomberg that the Treasury Department is expected to let the waiver lapse once it expires on May 25.

"I think it's reasonably likely that the license will be allowed to expire. There has not been a final decision on that, but I think it's unlikely that it would continue," US Treasury Secretary Janet Yellen told reporters Wednesday in Germany before meeting G7 finance ministers.

She added that Russia is already cut off from global capital, and the country missing its debt obligations doesn't really represent "a significant change in Russia's situation."

The Kremlin has struggled to navigate payment channels essentially blocked by Western sanctions, making it difficult for money to reach bond holders.

Still, Russia has until now been able to use US banks as key conduits for delivering sovereign bond payments, although the country nearly missed a deadline earlier this month.

But an end to the Treasury Department's waiver next week would come just before the Kremlin's next payment is due on May 27 for bonds that mature in 2026 and 2036.