Argentina's Bankruptcy Chance Increases to 72%

The price of insurance against Argentine government bankruptcy jumped again on Tuesday as investors continued to react negatively to President Mauricio Macri’s heavy defeat in the country's primary elections this weekend, BNR reported.

Argentina's 5-year CDS (Credit Defalut Swaps), or the cost of bankruptcy insurance against Argentine debt held by investors, is rising today to 2116 points today, exceeding the five-year high reached on Monday from 1994 basis points, according to IHS Markit. In yesterday's trading alone, 5-year CDS jumped with nearly 1,000 points.

This means that today the $ 10 million Argentinean debt / five year guarantee / insurance has already reached $ 2,116 million compared to $ 1,994 million on Monday.

IHS Markit calculations show that the current price level of 5-year CDSs means that the likelihood of Argentina's bankruptcy (defaulting on the country's external obligations) has increased to over 72% over the next five years.

This is a fact, though, on Tuesday, there are indications of a stabilization of Argentine government bonds and stocks, as well as Argentine pesos following yesterday's brutal capital market sales in the Latin American country.

The prices of all US dollar-denominated Argentinean debt maturing between 2021 and 100-year maturing in 2117 rose cautiously by US $ 0.5.

The shares of Argentine banks listed on Wall Street rose in today's over-the-counter trading, with Argentinian bank Banco Macro up 5% and Grupo Supervielle up 10%, but after yesterday they went down by nearly half their market value ( a decrease of about 50%)

The Argentine currency, however, stabilized around 53 pesos for one USD, after initially collapsing by nearly 25% on Monday to levels above 62 pesos before closing the trade at a depreciation of 15% to the level of 53 pesos for one dollar.

Yesterday was indeed a brutal day for the Argentine financial markets following the news of Mauricio Macri's severe defeat at the country's primary election this weekend, which drastically reduced the chances of a pro-business president to win an official election scheduled for October.

The peso went down by 15%, the Merval stock index on the Buenos Aires stock market collapsed by 48%, the second largest one-day decline since 1950, and the 100-year bond maturing in 2117 fell 20% to against the backdrop of renewed investor concerns about Argentina's looming state bankruptcy.

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