* Bonds slip 3 pct as U.S. judge freezes Central bank deposits
* Stocks fall on deepening legal, political dispute
* Peso ends flat against the U.S. dollar (Updates prices, adds U.S. accounts embargo)
By Jorge Otaola
BUENOS AIRES, Jan 12 (Reuters) - Argentine bonds and stocks sank on Tuesday after a U.S. judge froze accounts held by the Central Bank in the United States, deepening a legal dispute over Argentina's plan to use foreign reserves to pay debt.
The decision to freeze the accounts was made by U.S. District Court Judge Thomas Griesa, who is handling a series of lawsuits brought by holders of defaulted Argentine bonds.For details see [ID:N12112043]
The news sent sovereign debt traded over the counter in Buenos Aires tumbling 3 percent on average, dragged down by heavily traded peso-denominated Discount bonds ARDISCP=RASL, which fell 8 percent.
The account embargo further complicates a bitter political and legal dispute over Argentine President Cristina Fernandez's plan to pay debt obligations this year with part of the Central Bank's $48 billion in foreign currency reserves.
A judge last week blocked the plan and ordered the reinstatement of Central Bank chief Martin Redrado, whom Fernandez fired for opposing the measure.
"Griesa's decision radically changed the market's mood," said Guido Macchi, a trader at the Julio Macchi brokerage. "Straight after the news, investors' mood changed really fast because they realized Argentina has a lot more problems to resolve."
The same Argentine judge who blocked the reserves plan and ordered Redrado's reinstatement effectively extended the deadlock on Monday by turning the legal wrangle into an ordinary judicial case.
That means it could take much longer for the courts to rule on the issue, which has rattled Argentine markets and ended a rally for government bonds.
The risk spread on Argentine bonds widened by 47 basis points to 729 basis points over comparable U.S. Treasuries, according to the benchmark J.P. Morgan Emerging Market Bond Index 11EMJ, far more than for other emerging market countries.
Stocks .MERV fell 2.03 percent to 2,270.49 points, affected by domestic political jitters and the influence of selling in other global equity markets.
In the foreign exchange market, the peso closed unchanged against the U.S. dollar in thin trade monitored closely by the Central Bank, traders said.
In formal interbank trade ARS=RASL, the peso currency ended at 3.7925/3.7950. In informal trade between foreign exchange houses ARSB=, it closed at 3.865/3.87 peso per dollar. (Writing by Eduardo Garcia; Editing by Dan Grebler)