Financial meltdown and unilateral default

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The government of Russia issued bonds in 1996 for the first time since the 1917 revolution. Demand was so great that the amount of the issue was raised from $200 million to $1 billion. The prime minister of Russia stated that the market's reaction "reflected the trust international investors have in Russia." It should be noted, however, that the yield required by investors in the five-year bonds was 9.36%, nearly 3.5% higher than similar U.S. Treasury issues. Russia's borrowing spree ended in a financial meltdown and unilateral default on much of its debt.

A. Evaluate if the decision to end the borrowing spree by the Russian government justified

Reference no: EM133116508

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