Which Russian default and ruble crisis triggered the collapse of Long-Term Capital Management in 1998?

The 1998 Russian financial crisis triggered the collapse of Long-Term Capital Management. Russia defaulted on parts of its domestic debt and devalued the ruble in August 1998, sending shock waves through global markets.

The crisis followed weak public finances, falling commodity prices, and heavy reliance on short-term government borrowing. Investors rushed away from Russian assets, while the ruble lost much of its value. The turmoil also widened price differences in other markets, creating losses for highly leveraged investors.

Long-Term Capital Management, a major hedge fund, had large positions built on convergence trades. Its losses threatened broader financial instability because many banks were counterparties. The Federal Reserve Bank of New York helped coordinate a private-sector rescue, but the U.S. government did not directly provide the fund’s bailout money.

The Russian episode is distinct from the 1997 Asian financial crisis, although both contributed to a wider period of emerging-market turmoil.