JP Morgan and Goldman Sachs have reaped significant profits trading Russian debt and derivatives this year amid a dramatic reshuffling in investor exposure to the country following Moscow’s invasion of Ukraine in February.

Emerging market specialist Akash Garg at JP Morgan has been one of the standout traders during this tumultuous period, helping the US bank generate around US$100m in revenues from Russia-related debt exposures, according to sources familiar with the matter. Goldman Sachs has also made about US$100m with Steven Gooden one of the traders to perform strongly, sources said. Elsewhere, Barclays has made at least US$50m in revenues with head of CEEMEA corporates Oleg Sarzhin among those to do well, sources said.

Trading Russian sovereign and corporate debt has not been for the fainthearted this year following the start of the war in Ukraine. Prices have whipsawed on concerns over defaults spreading across the Russian economy as Western sanctions bite. International lenders have also had to tread carefully to avoid breaching the complex set of new rules limiting contact with many companies and individuals.

Still, those sanctions have stopped short of prohibiting trading in Russian credit derivatives or bonds in secondary markets, allowing banks to cater to the surge in demand from Western asset managers to dump positions, often at fire sale prices. That volatile backdrop has created a fruitful trading environment for the small group of banks possessing both the expertise and risk appetite to remain active in these markets.

"Some banks have been well positioned for the move and are still actively trading,” said one EM trader. “The reality is there are only a handful of banks in the Street that would have the risk appetite to facilitate client flows in this environment.”

A spokeswoman for Goldman told IFR: "Our trading activity in Russian securities is focused on clients’ risk reduction so they can proceed with an orderly wind down of exposure."

Spokespeople for JP Morgan and Barclays declined to comment.

But it’s not just buying and selling Russian bonds that has proved profitable. Sources said trading in Russia credit-default swaps has also been an important driver of revenues. Russian sovereign CDS prices have swung wildly in recent weeks amid widespread confusion over whether Moscow will default on its external debt – something it has avoided so far.

The upfront cost of insuring against a default on US$10m of Russian debt for five years jumped to US$6.8m on Tuesday, according to IHS Markit, compared with a recent low of US$4m in mid-March. That came after the US Treasury on Monday stopped the Russian government paying sovereign debt holders from reserves held at US banks.

In a separate development, an industry body known as the Credit Derivatives Determinations Committee said it would meet on Wednesday to discuss whether a CDS trigger event had occurred on Russian Railways following the state-owned company's failure to make a coupon payment to bondholders within the allotted time.

Shoodboi:
JP Morgan and Goldman mint US$100m each trading Russian debt





https://www.ifre.com/story/3317586/jp-morgan-and-goldman-mint-us100m-each-trading-russian-debt-1ynqk4mkrv