(Updates with closing prices, fresh quotes)
BUENOS AIRES, Oct 6 (Reuters) - Argentine stocks, bonds and the peso suffered heavy losses on Monday amid a global market sell-off sparked by fears of a worldwide recession.
The MerVal index of leading shares .MERV closed down 5.9 percent lower at 1,423.35 points, after shedding more than 11 percent earlier in the session.
"People don't want to take any chances, they're abandoning bonds and stocks and covering themselves with dollars," one foreign currency trader said.
Stock market losses were led by index heavyweight Tenaris (TENA.BA), which makes steel tubes for the energy industry. Its shares fell 10.2 percent at 47.5 pesos.
Tenaris tends to fall along with oil prices, which sank to an eight-month low below $88 a barrel.
Meanwhile, Argentine bonds traded locally plunged 6.5 percent on average in over-the-counter trade. Dollar-denominated Discount bonds ARDISCD=RASL took the biggest hit, shedding 12 percent according to the ask price.
Bonar 2013 bonds in dollars fell 9.2 percent.
Argentina's debt spreads over similar U.S. Treasuries widened 151 basis points to 1,191 on the JPMorgan Emerging Markets Bond Index Plus (EMBI+) 11EMJ.
The peso currency closed down 2.1 percent in informal trade between foreign exchange houses, as measured by Reuters, to 3.2375/3.2425 per dollar ARSB=, suffering its biggest one-day loss since November 2003.
That marked its lowest level since mid-May, when protests by farmers upset local financial markets.
In interbank trade, which is heavily regulated by the central bank, the currency fell 1.1 percent to close at 3.1950/3.1975 per dollar ARS=RASL, levels not seen since May 2002.
"The central bank is pumping dollars in the market, but demand is strong and everything is being absorbed," the foreign exchange trader.
The central bank also raised interest rates on short-term loans to banks BCRA05 by 75 basis points in a bid to help banks retain deposits in pesos and continue lending amid global market turmoil.
Interest rates on fixed-term deposits in pesos jumped to 13.5 percent from 12.8 percent previously, while the overnight interbank lending rate rose to 10.95 percent from 10.05 percent <AR/TASAS>.
A source at a private bank operating in Argentina said although there are no liquidity problems now, investors are expected to withdraw money from the fixed-term deposits to invest in the strengthening dollar.
Another financial-sector source said the central bank set the tone because if one individual bank were to raise its interest rates, rumors would fly that it was suffering a run on deposits. This way, banks can raise rates if they like and help stem the depreciation of the peso.
The central bank also expanded its automatic, daily buybacks of notes and bills to 50 percent to boost liquidity in the market. (Reporting by Walter Bianchi and Hilary Burke; Editing by Helen Popper and Leslie Adler)