(Bloomberg) -- Pacific Investment Management Co. has amassed a huge wager that Russia will not default on its debt, the Financial Times reported.

The Newport Beach, California-based asset manager has at least $1 billion of bets in the derivatives market and $1.5 billion of Russia’s sovereign debt, the newspaper reported on Thursday. At least five Pimco funds sold credit-default swaps to investors, the FT reported, citing its analysis of the asset manager’s holdings at the end of 2021. 

The positions mean it stands to lose both on its own bond holdings and on the insurance if contracts pay out. The derivatives are designed to compensate holders in the event of default.

The majority of Pimco’s swaps sit in its marquee $140 billion Income fund, run by Chief Investment Officer Dan Ivascyn, alongside Alfred Murata and Joshua Anderson, the FT reported. The fund disclosed that it had written $942 million of protection on Russia by the end of 2021. The other funds holding positions include Pimco’s Total Return bond fund, its Emerging Markets bond fund, Diversified Income and Low Duration income funds, according to the newspaper.

Credit-default swaps on Russia’s sovereign debt are trading at levels that suggest the market is expecting a high probability that the country will default on its debt. It has payments due on foreign bonds next week.

It costs $5.8 million upfront and $100,000 annually to insure $10 million of Russia’s debt for one year, suggesting a record 71% chance of default in that time, according to ICE Data Services. That compares with about $3.8 million in advance last week and about 300 basis points -- or $300,000 annually -- before Russia’s invasion of Ukraine.

(Updates with details of where the credit-default swaps are trading and the probability of default being priced by those contracts from the penultimate paragraph)

©2022 Bloomberg L.P.