Russia’s August 1998 default involved GKOs, short-term ruble-denominated government bonds.
The Russian government announced on August 17, 1998, that it would restructure domestic ruble debt, effectively defaulting on GKOs and related obligations. It also widened the ruble’s trading band before the currency was allowed to depreciate sharply.
The crisis followed weak tax collection, large budget deficits, falling commodity prices, and pressure from the Asian financial crisis. Investors had been attracted to Russian debt by high yields, but the government’s fiscal position and dependence on short-term borrowing made refinancing increasingly difficult.
The default caused heavy losses for domestic and international investors and contributed to the collapse of Long-Term Capital Management, a highly leveraged U.S. hedge fund. The U.S. Federal Reserve helped organize a private-sector rescue of LTCM, but it did not bail out the Russian government. “GKOs” is more precise than the broad answer “Russian bonds,” because it identifies the specific securities involved.