US banks have left Russia, but that doesn't mean they're done making money off the Kremlin's horrific invasion of Ukraine.
The sell-off of Russian debt associated with Russian President Vladimir Putin's campaign on Ukraine and the sanctions that ensued have created a window for a new type of arbitrage that some in the finance world are gobbling up, seeing it as easy money. The idea is what's known as a negative-basis trade, or purchasing dirt-cheap Russian government or corporate bonds along with credit-default swaps, which act as insurance on the potential default of a borrower.
US financial institutions like JPMorgan Chase and Goldman Sachs are facilitating these trades, connecting clients who want out of their positions with hedge funds that have a higher risk tolerance and less of a moral quandary about purchasing Russian debt. "This is Wall Street," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research."It doesn't surprise me that they saw some sort of a loophole they could exploit to make money.
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