Photographer: Diego Giudice/Bloomberg

Gaffe Sends Argentine Province Bonds Crashing, Renewing Jitters

Updated on
  • Economy ministry says governor’s comments led to confusion
  • Yields on benchmark bonds pare losses after statement

On Thursday, Latin America traders panicked after one of Argentina’s smallest provinces said it planned to restructure debt, stoking fears of a default.

On Friday, it turned out Chubut’s governor meant to say they want to refinance bonds.

"The use of the term restructuring instead of refinancing to extend debt maturities or improve the conditions may have led to confusion," the province said in a statement Friday morning. "We regret the confusion in the media and technical circles, but the Economy Ministry wants to make perfectly clear that there is no risk of default."

The interim governor’s one-word slip pushed yields on Chubut’s bonds 100 basis points higher on Thursday. And traders flocked to Twitter to lecture about impending doom in Argentine bond markets in the hours of uncertainty before the province’s economy minister told Bloomberg News there are no plans to restructure. Argentina’s Finance Ministry and central bank declined to comment.

The Chubut episode, while isolated, reflects a wider anxiety about economic policy in Argentina and the rapid pace of bond issuance since 2016, when the country emerged from 15 years of financial isolation that included two sovereign defaults. Since December, investors have had to contend with an unpredictable central bank led by President Federico Sturzenegger, changing inflation goals, the world’s worst currency and an overall fiscal deficit that remains above 6 percent.

“Anytime a restructuring happens people shoot first and ask questions later" Walter Stoeppelwerth, chief investment officer at Balanz Capital Valores Sa, said by phone. “When investors don’t understand what’s going on behind the scenes they get nervous and this thing with Chubut shows that there’s some sensitivity.”

— With assistance by Charlie Devereux

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