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Argentina faces CDS decision, Griesa meetings 0

Aug 1, 2014

  Cristina Fernández, Argentina's president,   
Axel Kicillof, finance minister, and Julián 
Alvarez, justice minister, with Buenos Aires
governor Daniel Scioli
Source: Casa Rosada
Two critical meetings scheduled for Friday could shape the path ahead for Argentina’s dispute with holdout creditors, after the sovereign defaulted on Wednesday following a break down in last-minute talks with bondholders.
US Judge Thomas Griesa has called a hearing for 11am in New York, while the International Swaps and Derivatives Association, ISDA, is also due to discuss Argentina today, to consider whether CDS referencing the sovereign should be triggered. 

Meanwhile, markets on Thursday came to terms with Argentina’s default after rumors of a deal drove a rally on Wednesday. CDS referencing Argentina widened to 44 points up front on Thursday, after tightening by 10 points, to 30, on Wednesday. 

Some liquid LatAm corporate bonds sold off on Thursday. But bond market observers said most investors were familiar with the differences in risk profile between Argentina and other Latin borrowers, and attributed the widening to a softer tone more broadly. 

"Some of what our market is doing is a delayed reaction to what has been happening in US high yield," said one market source, saying that bond investors were reacting to a weak earnings season and comments from the US Federal Reserve and adjusting valuations after a period of tightening. 

After talks between Argentina’s banking association and the holdouts also ended on Wednesday without a deal, reports indicated that some international banks were in discussions on Thursday to a similar end. Spokespeople for Citi and JPMorgan declined to comment on the rumors.

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