S&P downgrades Russia's sovereign credit rating to 'junk'

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International ratings agency Standard & Poor’s cut Russia’s sovereign credit rating yesterday, bringing it below investment grade for the first time in a decade. Cautioning difficult times ahead for Russia’s economy, S&P said that Russia’s economic growth prospects, hit by low oil prices and Western sanctions over the Ukraine crisis, had deteriorated.
A new low for Russia, international ratings agency Standard & Poor’s cut Russia’s sovereign credit rating yesterday, bringing it below investment grade for the first time in a decade. Cautioning difficult times ahead for Russia’s economy, S&P said that Russia’s economic growth prospects, hit by low oil prices and Western sanctions over the Ukraine crisis, had deteriorated.

Managing Director at Spiro Sovereign Strategy in London, Nicholas Spiro aired concerns ‘it’s going to make it more difficult for corporations and banks to refinance themselves, at a time when ratings agencies clearly have doubts about the external environment for Russia.’

Other rating agencies could also follow by downgrading Russian sovereign debt to what is known as ‘junk territory’ (when bonds that are not rated as investment grade are known as high yield bonds or as junk bonds) and there could eventually be a political impact on President Vladimir Putin if the economic crisis keeps worsening.

Putin, whose popularity rests partly on bringing financial wellbeing to many Russians, said shortly before the downgrade that his government was close to announcing details of an anti-crisis plan to maintain social stability and protect growth. The US and the EU have threatened to impose more sanctions following new violence in Ukraine though Putin says the fault lies with Kiev.