February 7, 2020 / 4:40 PM / 13 days ago

UPDATE 2-Argentina bonds jump 1.6% on debt deal optimism - traders

(Updates with treasury note auction)

BUENOS AIRES, Feb 7 (Reuters) - Argentine over-the-counter bonds jumped 1.6% on Friday on rising optimism over an eventual debt restructuring deal as the government gets ready to host an International Monetary Fund technical mission next week, traders said.

Risk spreads on Argentine bonds tightened compared to safe-haven U.S. Treasury papers, according to JP Morgan’s Emerging Markets Bond Index Plus, though they remain high after a bond market crash last year.

Argentina is locked in talks to restructure around $100 billion in sovereign debt, including with the IMF which extended a $57 billion credit facility to the South American country in 2018, the fund’s largest ever.

The country’s center-left President Alberto Fernandez, who came to power in December, has targeted striking a deal with creditors by the end of March, a deadline seen as ambitious but also a sign the government wants to avoid a hard default.

The country’s sovereign and Buenos Aires provincial bonds have been buoyed this week by positive signals, including a “meeting between Economy Minister Martin Guzman and IMF chief Kristalina Georgieva at the Vatican that both called constructive.”

Buenos Aires’s provincial government also averted defaulting on a 2021 bond when it agreed to make a $277 million payment after failing to get bondholder approval to push it back until May.

Graham Stock, senior sovereign strategist at Bluebay Asset management in London, cited rumblings that the country was close to striking some sort of deal with the IMF, which would be a major step toward unlocking the debt crisis.

“But a lot more detail has to be put round those bare bones and on its economic plans,” he said. “But things this week have been encouraging.”

Argentina will auction on Feb. 10 three peso-denominated treasury notes expiring in 2021, the economy ministry said.

Reporting by Walter Bianchi, Hugh Bronstein and Marc Jones in London Editing by Chizu Nomiyama and Richard Chang

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