BUENOS AIRES (Reuters) – Argentine bond prices popped higher, and country risk spreads tightened on Monday after the government announced a planned moratorium on local debt payments to ease what it has called an unsustainable financial burden.
Over-the-counter government bonds rose 1.2% and the Merval stock index rose 3.5% after losing 30% in March. Country risk spreads were also stronger on Monday, tightening 22 basis points to 3,661 over safe-haven U.S. Treasury paper, according to JP Morgan’s Emerging Markets Bond Index Plus .
Argentina aims to postpone until the end of the year payments on up to $10 billion of dollar debt that was issued under local law, according to a decree released late on Sunday, in a bid to relieve pressure over looming foreign currency payments.
The government decree does not affect Argentina’s nearly $70 billion in foreign currency debt issued under international law, currently the focus of restructuring talks with creditors.
“We read yesterday’s decision as a sign that the government wants to win time to put together a comprehensive debt restructuring during the first half of the year, prioritizing avoidance of default on external debt,” local consultancy Elypsis said in a note to clients.
Others said Monday’s markets rally was a sign that, after weeks of bond prices depressed by default fears coupled with global uncertainty over coronavirus, the market had nowhere to go but up.
Argentina’s government had previously said it was looking to restructure $83 billion in foreign currency debt under both international and local law. Delaying payments on local-law debt could give Argentina breathing room and may enable it more easily to pay foreign-law bonds.
Buenos Aires province, which narrowly averted default in February, said on Monday that principal maturities would need to be modified and coupons should be aligned with primary surplus and growth targets to achieve debt sustainability.
The province outlined its debt in a document posted online, including about $7.15 billion in foreign debt that it said is eligible for restructuring. The coronavirus crisis could significantly impact its 2020-2021 economic projects, the province said.
(Reporting by Walter Bianchi, Hugh Bronstein and Cassandra Garrison; Editing by Steve Orlofsky, Tom Brown and Cynthia Osterman)
