Argentine government bonds fell the most among major emerging markets after Standard & Poor’s cut the credit rating one level following a U.S. court ruling that threatens to impede the country’s overseas debt payments.
The extra yield investors demand to own Argentine government dollar bonds over U.S. Treasuries rose 33 basis points, or 0.33 percentage point, to 1,057 basis points at 5:43 p.m. Buenos Aires time. The sell-off was the biggest in emerging markets today after Belarus.
S&P yesterday lowered the country’s rating to B-, or six levels below investment grade with, citing the court ruling, which blocks the country from servicing its restructured debt while refusing to pay holders of its defaulted bonds. The government’s yield spread has surged from 851 basis points on Oct. 25, the day before the court released its ruling.
Government officials have stuck to their pledge to not pay the holdouts who rejected restructuring offerings in 2005 and 2010. Argentina defaulted on a record $95 billion of bonds in 2001.
“We’ll never pay the vulture funds,” Economy Minister Hernan Lorenzino posted on his Twitter account on Oct. 29. “Whoever thinks otherwise hasn’t understood a thing.”
The cost to insure Argentine debt against default in five years with credit default swaps surged 238 basis points to 1,734. The swaps have soared 775 basis points since the ruling.
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