Argentina’s missed bond payments have been ruled a default by the International Swaps and Derivatives Association, Inc. (ISDA) today.
The ISDA announced that its Americas Credit Derivatives Determinations Committee has decided that the country’s missed coupon payments now represent a “failure to pay credit event.” It also said that an auction will now be held to resolve outstanding credit default swap (CDS) transactions that are affected by the default event.
Yesterday, Fitch Ratings also said that it considers the country to be in default too. It downgraded Argentina’s ratings as a result, saying, “Argentina has not been able to cure the missed coupon payments on its discount bonds…after the expiration of the 30-day grace period on July 30. According to Fitch’s criteria, this constitutes an event of default.”
Fitch says that its downgrade reflects the agency’s view that “the economy will suffer from higher uncertainty and financial volatility following the sovereign default, especially as the duration of default is unpredictable.” It notes that the Argentine economy is already in recession, and it says this is likely to worsen as the default affects confidence, and may further constrain foreign exchange flows to the country, leading to exchange rate volatility.
Today, Fitch also downgraded several Argentine local and regional governments’ credit ratings, citing the sovereign downgrade.