Russia debt sanctions could send the ruble plunging 15%

Bloomberg

The ruble could plunge by as much as 15 percent and borrowing costs would spike to a three-year high if the US goes ahead with proposals to impose sanctions on Russian government bonds, according to a new model developed by Citigroup Inc.
Moscow-based analysts at the bank said that such extreme moves would come from a “worst-case scenario” of sanctions that bar foreigners from holding domestic sovereign bonds, also known as OFZs. A move to sanction only new issuance would weaken the ruble by about 5 percent, they said.
“While no sanctions by the US Congress seem likely for now due to the summer recess, risks that such restrictions will be implemented later on remain,” Citi analysts Ivan Tchakarov and Artem Zaigrin said in the research note published.
“The additional capital outflows generated by this event could ultimately weaken the ruble.”
The ruble weakened 0.6 percent to 62.89 against the dollar on Wednesday.