- Malaysian Ringgit Tumbles After 1MDB Default Raises Spectre Of Sovereign Failure
by Tyler Durden, www.zerohedge.com
Update: after widening by 2bps earlier, Malaysia CDS is now +4 at 167bps and starting to move as macro “analysts” finally catch up on the entire story and comprehend the implications.
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Malaysian CDS rose to near 3-month highs and the Ringgit has spiked over 300 pips – back near recent lows – after the Malaysian slushfund government investment fund 1MDB is reportedly in default. This is exactly the scenario we laid out last week that initially sent the currency lower and CDS higher, as the Abu Dhabi sovereign wealth fund has by all appearances started a potential waterfall default on Malaysian sovereign debt (due to cross-default triggers at the sovereign).
As we reported one week ago, Malaysia government investment fund was put into default by the Intl Petroleum Investment Co. Moments ago, the 5 day grace period on the missed $50.3 million payment on the TIAMK 5.75% 2022s privately placed by 1MDB Energy (Langat) expired, and as Bloomberg reported, 1MDB is now officially in default after missing its interest payment.
The big question now is – as SocGen explores – Given the default of 1MDB, Could a Malaysian Sovereign Default Occur?