Tensions over a potential Russian invasion of Ukraine have put international investors on edge. But some are holding on to Russian debt, betting that a diplomatic solution to the crisis could spark a rally.
Yields on Russian government and corporate bonds have shot up since the start of the year, with the spread between Treasurys and 10-year local-currency sovereign debt rising to 7.8 percentage points at the peak. The ruble has depreciated 3.5% against the dollar so far in 2022 and traded at the weakest level in 13 months last week before recovering moderately.
Russia has amassed thousands of troops on Ukraine’s border, moving into Belarus for military exercises in recent days. In response, the North Atlantic Treaty Organization’s allies are sending ships and jet fighters to Eastern Europe.
The escalation has sent ripples through broader…
