According to the Financial Times, pressure is intensifying on Argentina to settle with holders of defaulted debt, who are now owed $29bn including interest.  In 2001 the country defaulted on $95bn worth of debt.  Ever since, the country has been effectively barred from capital markets, despite a 2005 debt swap accepted by the majority of bondholders, since those holding out would be able to seize any funds raised.  A plan to settle with the hold-outs fell through last September after the Lehman collapse, and consequently Argentina’s continuing financial isolation is making it hard for it to meet its debt obligations.  Some economists fear it could be heading for a new default next year.

 

That said, some kind of settlement could be drawing near.  Five-year credit-default swaps based on Argentina’s bonds have taken a beating of late, and have soared nearly 10 percentage points in the past month, the worst performer among credit-default swaps tied to government debt.  Traders eyeing a convergence could be rewarded.

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