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Bloomberg: Argentine Contagion?
Posted by Tango
on August 13, 2019, 6:18 am
Emerging market investors' least favorite words were doing the rounds on Monday -- default and contagion. After Argentina President Mauricio Macri’s stunning defeat in primary elections over the weekend, the Argentinian peso slumped to a record-low and the country's dollar-denominated government bonds lost roughly 25% on average. Credit-default swaps now show that traders are pricing in a 75% chance that Argentina will suspend debt payments in next five years given the very real possibility a more protectionist government will take power come December. But while default chatter has increased, investors should take solace from the fact that few see contagion as an issue -- at least for now. Strategists at Citigroup see the news as Argentina specific with no significant spillover to the rest of emerging markets, as do those at Pimco. Still in the middle of the summer lull with liquidity already so thin, an emerging-market crisis is the last thing nervous investors want to see.
Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo.