Bonds rally as Argentina prepares holdout negotiations

miércoles 18 de junio de 2014 19:02 GYT

* Argentina closer to negotiations with holdouts

* Bonds reverse losses after talks announced

* Swap proposal seen as difficult solution

By Paul Kilby and Davide Scigliuzzo

NEW YORK, June 18 (IFR) - Argentina appeared to be inching closer to a negotiated settlement today with litigant investors who are seen having a legal stranglehold on a sovereign that has few options left to avoid a technical default.

The country's bond prices have seen some dramatic dips in recent days but prices largely ended higher Wednesday on news that Argentine government officials would begin talks with holdouts next week.

Par bonds were ending the day about four points higher at 44.75-45.25, while discounted bonds rallied a good two points to close at 77.00 mid market. "Everyone will be waiting to see how negotiations go," said a trader. "It may give them some time and that is what they need right now."

With the US Supreme Court rejecting Argentina's petition to appeal rulings favoring holdouts, the government has until a June 30 coupon payment on the discounts to reach a settlement. If it can't, it will be forced to pay both holdouts and restructured bond holders or default on all its New York law bonds.

In theory, the government could push that deadline out another 30 days if it uses the grace period. But solving the payment problem over the next month or so was made all the more urgent today after the Second US Circuit Court of Appeals lifted a stay on a judge's order to pay US$1.33bn to NML Capital, and other litigant investors.   Continuación...