Argentine Bonds Rally After Paris Club Sets Date for Debt Talks

Argentine bonds jumped today for the first time this week after the Paris Club of creditor nations invited the South American country to begin formal negotiations in May to settle its outstanding debt.

The price on the notes rose 0.53 cent on the dollar to 95.43 cents at 11:30 a.m. in Buenos Aires, according to data compiled by Bloomberg. The extra yield investors demand to own Argentine bonds over U.S. Treasuries narrowed 23 basis points to 902 basis points, the biggest decline in emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.

The Paris Club invited President Cristina Fernandez de Kirchner’s government to begin talks to settle outstanding debt the week of May 26, spokeswoman Clotilde L’Angevin said today in a telephone interview. An agreement to settle the estimated $10 billion of debt, would be a positive step for Argentina to attract investment, said Alejo Costa head of research at Puente Hnos Sociedad De Bolsa SA in Buenos Aires.

“Argentina needs to take many steps to regain access to international capital markets and this is one of them,” he said in an e-mail response to questions. “This will help unblock loans from European countries and attract foreign direct investment.”

The Paris-based group of creditors which includes Japan, the U.S., Germany and France, is inviting Argentina to negotiate after it received a revised repayment proposal, L’Angevin said. Argentine Economy Minister Axel Kicillof traveled to France on Jan. 22 to present an initial proposal.

Creditor Relations

“In January, the Paris Club of creditors received an official proposal from Argentina for a formal repayment of arrears including past interests due,” L’Angevin said. “Based on a revised proposal from Argentina, the club has invited the government of Argentina to come negotiate an agreement during the week of May 26.”

Argentina’s proposal includes a $2 billion initial cash payment and subsequent annual installments over five years, BAE newspaper reported today, citing government officials it didn’t identify.

L’Angevin declined to comment on the report or details of the payment proposal.

Argentine Cabinet Chief Jorge Capitanich said earlier today the government is ready to discuss “terms, conditions, payment methodology and other details” once summoned for talks.

With Argentina locked out of international debt markets since its record $95 billion default in 2001, the government is seeking to repair relations with the International Monetary Fund, World Bank and the Paris Club to access new financing.

The government unveiled a new inflation index on Feb. 13 that showed prices rising about three times as much as previously reported after the IMF censured the nation last year. Fernandez also agreed to compensate Repsol SA for the expropriation of its 51 percent stake in energy producer YPF SA.

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