January 8, 2010 / 2:31 PM / 11 years ago

Argentine stocks, peso weaken on debt fund crisis

BUENOS AIRES, Jan 8 (Reuters) - Argentina’s currency, bonds and stocks weakened in early trade on Friday after a federal judge blocked a presidential order to create a fund using foreign reserves to guarantee debt payments this year.

The benchmark MerVal stocks index .MERV was off 2.29 percent to 2,334.65 points at 1428 GMT.

The country’s biggest financial conglomerate Grupo Financiero Galicia GFG.BA was one of the top value leaders, off 2.28 percent to 2.14 pesos per share.

Local banks are major holders of Argentine sovereign bonds and their stock tends to fall when bond prices are hit.

Bond prices also fell on doubts over whether the government will be able to create its debt guarantee fund with foreign reserves, which would remove perceived risk of a default as debt obligations rise steeply this year just as growth in government income has slowed due to an economic slowdown.

The risk spread on Argentine bonds jumped by 33 basis points to 701 basis points, the widest in three weeks, over comparable U.S. treasuries, according to the J.P. Morgan Emerging Market Bonds Index 11EMJ.

The Boden 12 bond denominated in dollars ARBODEN12D=RASL dropped 1.33 percent to an ask price of 33.45 in over-the-counter trade in Buenos Aires, according to Reuters data.

The interbank peso weakened by 0.20 percent to 3.8000/3.8025 per U.S. dollar ARS=RASL. (Reporting by Jorge Otaola; Writing by Fiona Ortiz; Editing by Theodore d’Afflisio)

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