The Bolshevik government repudiated Tsarist-era state obligations after the Russian Revolution. A revolution can transform the meaning of a government's promise overnight.
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Foreign holders faced losses and legal uncertainty as political recognition and debt settlement became entangled. For foreign bondholders, political legitimacy suddenly became a financial risk.
This is an extreme reminder that bonds depend on institutions surviving. Bond values depended on more than interest rates; the survival of the borrowing state and its promises became central.
A legal claim can remain disputed for decades without guaranteeing practical recovery for investors. A legal claim and a collectible claim are not the same thing.
Can a new political regime reasonably reject obligations incurred by a government it has overthrown?