Exactly one week ago the US Supreme Court rejected Argentina’s appeal in the high-profile debt case with holdout hedge funds led by NML Capital and Aurelius Capital Management stemming from the country’s 2001 default. The week that followed was full of mixed signals, speculation and posturing on both sides of the case.
Considering the market’s disdain for uncertainty, Argentine stocks and bonds tanked last week while the blue dollar soared. Televised press conferences, full-page ads in the Wall Street Journal and Washington Post, Basta Buitre posters on BA streets and the requisite avalanche of tweets from the ruling administration and 2015 presidential hopefuls only added to the uncertainty.
Now that it appears Argentina will negotiate with the holdouts, markets are soaring. Euphoria In The Markets is how La Nación describes the reaction today on the Merval, in the Argentine bond market and the casas de cambio where the blue rate fell 70 cents today to $11.70. Shares of state energy company YPF hit their highest level since February 2012 and bank stocks like Galicia, Frances and Macro all rose 13% in Monday trading.
Since Friday’s announcement, Argentina’s country risk as measured by JP Morgan fell 16% in just one day. The current level of 688 basis points is the country’s lowest level since August 2011 when Argentina country risk was 648 bps. Finally, Central Bank President Aldo Pignanelli says the decision to negotiate with the holdouts “completely dispels the possibility of a default.” (Full Story in Spanish)
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