NEW YORK, Feb 24 (IFR) - Argentina bonds were bouncing off intra-day lows on Wednesday following news that major holdout investors were nearing a US$5bn deal with the government.
Local law Bonar 2024s were up a point in early afternoon trading to hit 107.50-108.00, while New York law discounts had inched about half a point higher to be quoted at 118.75-119.25.
Matthew McGill, a lawyer representing lead holdouts Elliott Management and Aurelius Capital Management, was quoted as saying that an agreement on economic terms with Argentina had been reached.
While the court appointed mediator in the negotiations subsequently said such statements “violated confidentiality”, the news was important as both hedge funds had so far been resistant to signing on to Argentina’s latest proposal.
An increasing number of investors which had refused to participate in the 2005 and 2010 restructurings have accepted the government’s offer in recent weeks.
A more conciliatory approach from Argentina’s new finance team has won applause from investors, the US Treasury and Daniel Pollack, the court appointed mediator over the negotiations.
The country’s bonds rallied on Monday after US judge Griesa signaled on Friday he would be willing to lift an injunction that prevents Argentina from servicing restructured debt like the discounts.
Griesa said such a move would serve public interest provided that Argentina repealed two laws concerning its debts and paid all creditors who agreed to settle by February 29.
“With what happened on Friday, Argentina will likely end its default sooner rather than later,” said Hernan Yellati, head of research and strategy at BancTrust & Co.
“We had previously expected that (Argentina would cure its default) in the second half but now we believe it could happen sooner.”
Discounts jumped all the way to 120.00 on Monday only to sell off the following day after Finance Minister Alfonso Prat Gray reportedly said Argentina would issue up to US$15bn in bonds to pay holdout investors.
While holders of restructured bonds will benefit from receiving a backlog of coupon payments once the injunction is lifted, it was the local law bonds that outperformed on Wednesday.
“This may be related to the fact that Argentina is expected to issue in New York paper whose duration will be closer to the discounts,” said Jorge Piedrahita, CEO of brokerage Torino Capital.
The high dollar price on the discounts already implies that investors are putting a high probability that those coupon payments would soon be paid.
“It will be a nice piece of change,” said Piedrahita who said holders of discounts are owed about US$16 in accrued interest for each US$100 held. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)