Argentine Bonds Fall Most in Emerging Markets, Extending Rout

Argentine bonds fell the most in emerging markets today, extending losses sparked by an Oct. 26 U.S. court ruling favoring bondholders of defaulted debt.

The extra yield, or spread, investors demand to own Argentine government dollar bonds over U.S. Treasuries rose 20 basis points, or 0.2 percentage point, to 1,147 basis points at 4:15 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI Global index. The average spread in Latin America narrowed 2 basis points to 361, according to the index.

S&P lowered the ratings for three Argentine provinces and the city of Buenos Aires yesterday to B-, six levels below investment grade, from B, and also cut rankings for four Argentine banks and 11 companies. The rating for sovereign bonds was reduced to B- two days earlier by S&P, which cited the court ruling that said the country can’t make payments to current bondholders while refusing to pay on defaulted bonds.

“Recent negative events underline the growing number of risks the Argentine government could face in managing its economic policies and finances in the short term,” the credit- rating company said in an e-mailed statement.

The cost to insure Argentine debt against default fell 35 basis points to 1,997 basis points, after surging 298 basis points yesterday to the highest level since July 2009. Credit- default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

To contact the reporter on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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