UPDATE 3-Argentine bonds rise after default as Fitch, S&P cut ratings

(Adds Credit Derivatives Determinations Committees being questioned on credit event)

BUENOS AIRES, May 26 (Reuters) - Argentine bonds rose strongly on Tuesday on optimism that a restructuring deal being brokered with creditors could be in reach, even as ratings agencies slapped the country with downgrades after it defaulted for the ninth time last week.

Over-the-counter bonds rose 3.8%, while country risk tightened 243 basis points to 2,535 over U.S. Treasuries, amid hopes negotiations to revamp $65 billion in debt would take “days, not months”.

Argentina and its creditors are in talks to reach a deal by an already pushed-back deadline of June 2 to avoid the country falling into a messy default that could spark years of legal wrangling over payouts.

Fitch on Tuesday downgraded Argentina’s sovereign rating to restricted default due to the missed payment relating to three bonds on Friday after a 30-day grace period on the payments expired. It cut the ratings on the bonds themselves to default.

S&P cut the three bonds and a fourth local-law dollar bond to default and said they would remain there “pending conclusion of the debt renegotiations that are currently underway.”

Fitch acknowledged restructuring talks were moving forward, though it said an agreement would need to fulfill collective action clauses on the bonds.

“The parties involved have indicated recent progress toward a comprehensive restructuring, although uncertainty remains around the prospects for reaching a deal,” it said.

It added that once a deal was achieved and relations with creditors were normalized that would warrant upgrading the country’s sovereign rating.

The Credit Derivatives Determinations Committees, which determine when credit default swaps should be triggered, was asked on Tuesday whether a failure to pay credit event had occurred in Argentina. It will make a ruling at a later date.

The country’s largest province, Buenos Aires, is carrying out parallel restructuring talks to revamp $7 billion in foreign debt. It has extended negotiations until June 5. (Reporting by Walter Bianchi and Hugh Bronstein in Buenos Aires Writing by Adam Jourdan Editing by Tom Brown and Matthew Lewis)