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Turning Change Into Opportunity


Fri Aug 1, 2014 12:59pm EDT
By Davide Scigliuzzo, Reuters


NEW YORK, Aug 1 (IFR) – The International Swaps and Derivatives Association (ISDA) on Friday declared Argentina in default, which could trigger payments worth up to USD1bn on credit default swaps.

ISDA’s determinations committee voted unanimously that a “failure to pay” event occurred on July 30, when Argentina missed a coupon payment on some restructured foreign-law bonds. The ISDA committee will now hold an auction to settle the outstanding CDS transactions.

Argentine bonds extended losses in the immediate aftermath of the decision. “Generally bonds are lower by 1 to 2 points,” one New York-based trader said. “Things got hit further.” Argentina’s Discount 2033s denominated in US dollars and euros traded at cash prices as low as 86 and 81 respectively after ISDA’s announcement, he said.

A trader in Miami said some accounts took a bet on the Argentine-law bonds, sending them marginally higher, but that overall volumes remain well below previous sessions. “I saw some buyers of the Boden 2015s, but I think that’s too risky as I don’t see a solution in the short term,” the trader said. “The situation in getting more complicated day by day.”

CDS reaction was muted as market participants wait for ISDA’s auction process to start and accounts remain hesitant to take positions. “All prices disappeared,” said the trader. “But it is a small market, so there won’t be much movement.”

The net notional outstanding on Argentina’s CDS contracts is just over US$1bn after accounting for offsetting trades, according to data form the Depository Trust & Clearing Corporation. (Reporting by Davide Scigliuzzo; Editing by Marc Carnegie)

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