Argentine dollar bonds surged the most in emerging markets on a report that holdout creditors will request an emergency stay on a U.S. court ruling before a July 30 deadline to continue settlement talks.
Government bonds due 2033, whose interest payment was blocked by courts last month, rallied 2.3 cents to 88.52 cents on the dollar at 11:15 a.m. in Buenos Aires. The extra yield investors demand to hold Argentine debt over U.S. Treasurys narrowed 0.27 percentage point to 6.28 percentage points, according to JPMorgan Chase & Co.’s EMBIG Diversified index. The spread on emerging market debt narrowed 0.06 percentage points on average.
Argentine newspaper La Nacion reported today that holdout creditors, including Elliott Management Corp., may ask U.S. District Court Judge Thomas Griesa to delay his ruling ordering the country to pay a group of investors holding defaulted bonds in full when servicing restructured debt. Aurelius Capital Management LP, which sued for better terms alongside Elliott, called the story “utter fiction,” according to an e-mailed statement, causing bonds to pare their gains.
“Since people’s perception of default risk has been rising the last few days, if there is any kind of rabbit to be pulled out of the bag that says default can be avoided the market’s going to take that very positively,” Stuart Culverhouse, global head of research at Exotix Partners LLP, said in a telephone interview from London. “However credible or not the actual story is.”
A delegation of Argentine officials led by Finance Secretary Pablo Lopez will meet with a court-appointed mediator Daniel Pollack today in New York to try and reach a settlement with holdouts. If Argentina doesn’t reach a deal or obtain a delay on the ruling, the nation will default on July 30.
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