(Adds bond market reaction, quote)
SAO PAULO, June 16 Argentine stocks and bonds
plunged on Monday after the U.S. Supreme Court declined to hear
the country's appeal to avoid paying $1.33 billion to hedge fund
creditors, sparking fears of a default.
Other Latin American markets also weakened, with the MSCI
Latin American stock index slipping for the
third straight session as concern over escalating global
geopolitical tensions sapped appetite for riskier investments.
The U.S. Supreme Court on Monday left intact lower court
rulings that ordered Argentina to pay holdout creditors, which
the country had warned could lead to a default on its sovereign
In the wake of the decision, Argentina's U.S.
dollar-denominated 2017 Global bond fell nearly 5
points in price to bid 88.40 with the yield rising to 13.649
percent, according to Thomson Reuters data.
The U.S. dollar-denominated 2033 Discount bonds
fell 7.86 points in price to bid 75.01, yielding
Argentina's five-year credit default swaps contract
midprice surged 34 percent to nearly 2,350, with
the upfront cost rising to 46 percent from 36.25 percent on
Friday, according to data provider Markit.
"This ruling is the last thing that the government needs
given that the economy appears to have slipped into recession in
the first quarter," wrote Capital Economics' David Rees on
Monday. "Crucially, though, there has been no sign of contagion
to other emerging markets."
Argentina's Merval stock index dropped over 6
percent, on track for its biggest one-day loss in nearly seven
"Stocks and bonds are falling sharply due to the court's
decision," said a trader in Buenos Aires who declined to be
named. "No one wants to risk much more on speculation as we now
have to await the government's position on this."
Brazilian, Mexican and Chilean stocks all fell slightly,
tracking global markets lower as violence escalated in Iraq and
Currencies tracked lower across the region, with traders
keeping a watchful eye on the outlook for global interest rates
ahead of the U.S. Federal Reserve's next monetary policy
announcement, scheduled for Wednesday.
"The Fed probably won't raise interest rates but it should
note an improvement in the economy and that can cause market
stress," said Celso Siqueira, head of currency trading at
brokerage firm Advanced in Sao Paulo.
Colombia's peso traded lower a day after President
Juan Manuel Santos won re-election.
"By re-electing President Santos, Colombia voted for the
continuation of peace negotiations between the government and
the FARC," BNP Paribas' Nader Nazmi wrote on Monday, adding that
a peace agreement "could potentially lift Colombia's long-term
GDP growth rate."
Key Latin American stock indexes and currencies at 1657 GMT:
Stock Latest daily % YTD %
indexes change change
MSCI Emerging Markets 1045,8 -0,32 4,63
MSCI LatAm 3387,89 -0,2 6,06
Brazil Bovespa 54717,13 -0,16 6,23
Mexico IPC 42426,48 -0,14 -0,70
Chile IPSA 3850,5 -0,33 4,09
Chile IGPA 18835,71 -0,27 3,34
Argentina MerVal 7505,46 -6,73 39,22
Colombia IGBC 14346,92 0,61 9,76
Peru IGRA 16229,34 0,11 3,02
Venezuela IBC 2154,4 -0,5 -21,27
Currencies Latest daily % YTD %
Brazil real 2,2325 -0,13 5,57
Mexico peso 13,0291 -0,11 0,01
Chile peso 555,9 0,13 -5,36
Colombia peso 1890,8 -0,49 2,18
Peru sol 2,796 -0,32 -0,11
Argentina peso (interbank) 8,1300 0,00 -20,14
Argentina peso (parallel) 11,9 -1,51 -15,97
(Reporting by Asher Levine and Bruno Federowski; Additional
reporting by Walter Bianchi in Buenos Aires; editing by Andrew