June 16, 2014 / 3:40 PM / 3 years ago

Argentina debt plunges after US Supreme Court rejects appeal

NEW YORK, June 16 (Reuters) - Investors dumped Argentine debt on Monday after the U.S. Supreme Court on Monday declined to hear the South American nation’s appeal to overturn a lower court decision ordering that it pay holdout sovereign creditors $1.33 billion.

Argentina has said it would never pay the holdouts who have held sovereign debt that has since been restructured in two exchanges by approximately 93 percent of its bondholders.

If it cannot come to an agreement with the holdouts and pay them at the same time it pays the bondholders who participated in the exchanges, Argentina will enter a technical default.

In the wake of the decision, Argentinas 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 7.89 points in price to bid 74.975, yielding 11.976 percent.

Argentina’s five year credit default swaps contract midprice surged 34 percent to nearly 2350, with the upfront cost rise to 46 percent from 36.25 percent on Friday, according to data provider Markit.

CDS contracts protect investors from default or restructuring of their debt.

Argentina has just $894.4 million of net notional amounts of CDS contracts outstanding, up from the $750 million low reached in December of last year. By comparison, Spain has a net notional of $10.4 billion and Brazil has $17.4 billion, according to data from the Depository Trust & Clearing Corporation. (Reporting by Daniel Burns and Daniel Bases; Editing by James Dalgleish)

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