UPDATE 1-Argentina keeps options open on $5.9 billion bond payout due Oct. 5
(Adds possibility of increase China currency swap, bonds move)
By Sarah Marsh and Jorge Otaola
BUENOS AIRES, Sept 30 (Reuters) - With five days to go until payment is due on a $5.9 billion maturity of Boden 15 bonds, Argentina is leaving bondholders guessing whether it will pay the whole amount in cash or launch a last-minute swap in order to protect its foreign reserves.
The capital and interest payment on the dollar-denominated bond would take a large chunk out of foreign reserves that stand at $33.311 billion. Argentina uses those reserves to pay debt, finance imports and prop up its currency.
Argentine bonds rose on Wednesday in part on speculation the government would seek to rebuild reserves after the bond payment by increasing its currency swap line with China, traders said. Over-the-counter bonds were up 1.4 percent on average.
Economy Minister Axel Kicillof told local radio late last week that investors were "desperately" calling for a swap of the Boden 15 for other bonds, but he was still assessing market conditions. "It is better not to create expectations."
"In our view the appetite for a swap is low, though it would depend on how attractive the swap offer is," said Alejo Costa, chief strategist at local investment bank Puente.
Volatility in markets worldwide because of China's slowdown, uncertainty over the timing of a U.S. interest rate increase and turmoil in emerging markets including neighboring Brazil make it a bad time for a swap, economists say.
A sell-off in Argentine debt after the government ordered mutual funds to adjust the way they value dollar bond portfolios has further complicated matters. Continuación...