April 5, 2010 / 8:21 PM / 10 years ago

Argentine stocks, bonds rally on debt swap hopes

* MerVal stock index hit record on oil prices, debt swap

* Argentine country risk tightens on swap acceptance hopes

* Locally traded bonds close up by 1 percent on average

BUENOS AIRES, April 5 (Reuters) - Argentine bonds and stocks rose on Monday and the country risk narrowed to its tightest since July 2008 on expectations for a high rate of acceptance in a planned swap of up to $20 billion in defaulted bonds.

Locally traded bonds <AR/BONOS> closed up 1 percent on average as investors continued to buy sovereign debt in the run-up to the exchange, which is set to launch on April 14.

Analysts think investor acceptance could reach about 80 percent, higher than the government’s target for 60 percent.

Dollar-denominated Boden 2014 bonds ARBODEN14D=RASL rose 2.5 percent to an ask price of 33.30. The 2033 Discount bond in dollars ARDISCD=RASL gained 2.2 percent to an ask of 77.65.

The spread between the yield on benchmark Argentine bonds and on comparable U.S. Treasuries narrowed 37 basis points to 609, according to the JP Morgan Emerging Markets Bond Index 11EMJ.

Positive investor sentiment over the debt swap lifted banking stocks, helping the benchmark MerVal stock index .MERV climb 3.19 percent to a record high of 2,449.53.

“A whole series of factors helped the MerVal reach a record and also boosted bond prices,” said Leopoldo Olivari, a trader at brokerage Bacque.

“We need to take into account the favorable U.S. jobs data ... as well as the expectations for a high level of acceptance in the debt swap, which helps bonds and therefore banking stocks,” he added.

Argentine banks are major holders of government bonds, so a debt price rally boosts their shares. Among the sector gainers was Banco Macro (BMA.BA) BMA.N, which closed up 6.2 percent at 12 pesos per share.

Oil price rises also boosted energy-related stocks, including index heavyweight Tenaris TENA.BA (TS.N), which makes steel pipes for oil drilling. (Reporting by Jorge Otaola; Writing by Helen Popper; Editing by James Dalgleish)

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