(Adds trader quote, bond prices)
By Davide Scigliuzzo
NEW YORK, March 30 (IFR) - Clearstream will not process coupon payments on some of Argentina’s local-law exchange bonds due on Tuesday, the clearing house said in a note to clients on Monday.
While markets have widely been expecting intermediaries to block coupon payments on the local law Par bonds due tomorrow, traders marked down the country’s bond prices by as much as two points in response to the news.
“I would say bonds are down two points after (the) Clearstream (announcement), but we have not had a single trade today,” said one broker in Miami.
Argentina-law Discounts were being indicated at 95.50-96.00 versus 97.00 on Friday, while Boden 2015s were being quoted at 100.75-101.00, or a good 50 cents lower than levels seen at the end of last week.
Prices, however, are hardly firm given that trading in the securities have essentially ground to a halt after Clearstream and Euroclear advised clients last week that the bridge between the two entities would be blocked for some of the local law instruments.
“Bonds are being quoted down and people are trying to get out of positions that they have,” said the broker. “This has made the market very illiquid.”
Investors have expressed concerns that the US court decision last week to effectively block payments on local-law dollar bonds threatens to broaden Argentina’s recent debt default to instruments previously considered beyond the reach of US law.
Today’s announcement by Clearstream is thought to have only reinforced such fears.
“Clearstream has advised its customers that it does not intend to effect any payment that it may receive in respect of securities falling subject to the injunction,” a Clearstream spokesperson told IFR separately on Monday, referring to the US court order halting the payments.
Holdouts led by Elliott Management’s NML Capital unit have won a series of legal battles against Argentina, which ultimately led to the country’s second default in a little over a decade last year, when US district judge Thomas Griesa blocked coupon payments on nearly US$30bn of restructured bonds issued under foreign law.
Earlier this month, Griesa said some US dollar-denominated Argentine-law notes were also covered by his earlier injunction that prevented Argentina from servicing its restructured bonds unless it also made holdout creditors whole.
Officials at Argentina’s Economy Ministry declined to comment on the impending payment.
Clearstream’s action affects securities with the following ISIN numbers: ARARGE03E097, ARARGE03E113, ARARGE03G704, ARARGE03G688, ARARGE03E154. (Reporting by Davide Scigliuzzo; Additional reporting by Richard Lough; Editing by Jack Doran, Paul Kilby)