January 14, 2010 / 12:02 AM / 10 years ago

RPT-Argentina bonds, stocks gain after swap pledge

(Repeats story with no change to text)

* Stocks, bonds rebound from Tuesday’s sell-off

* Peso weakens as safe-haven dollar demand picks up

By Jorge Otaola

BUENOS AIRES, Jan 13 (Reuters) - Argentine stocks and bonds rose on Wednesday after the government vowed to press ahead with a debt swap in spite of a legal spat over government plans to use foreign reserves to pay debt.

Argentina is sending a “strong signal” that the swap to mop up defaulted sovereign bonds is going ahead as planned, Economy Minister Amado Boudou told Reuters in an interview. For details see [ID:N13136742]

Argentine bonds also got a lift from reduced investor concern about a U.S. court order that froze some Central Bank accounts because the government said only $1.7 million had been embargoed, though later on Wednesday court documents showed up to $2.7 bln had been frozen.

Sovereign debt traded over the counter in Buenos Aires ended up an average of 0.3 percent, reversing earlier losses of up to 1 percent. The peso-denominated Boden 12 bond ARBODEN12=RASL rose 1.6 percent to an ask price of 123.90.

“Boudou’s comments ... restore calm to the market by maintaining the idea that the swap is still on course,” said Christian Reos, an analyst at the Allaria Ledesma and Co brokerage.

The Argentine government is embroiled in a legal dispute over President Cristina Fernandez’s plans to use $6.6 billion in foreign currency reserves to pay debt obligations this year, rattling Argentine financial markets.

The benchmark MerVal index .MERV closed up 2.97 percent at 2,338.07 points, boosted by banking stocks such as Banco Patagonia (BPAT.BA), which rose 8.06 percent to 3.62 pesos per share.

The risk spread on Argentine bonds narrowed by 18 basis point to 712 basis points over comparable U.S. Treasuries, according to the benchmark J.P. Morgan Emerging Market Bond Index 11EMJ.

In the foreign exchange market, the peso weakened due to safe-haven dollar buying amid continued political tensions, traders said.

“In moments of tension, a lot of people buy dollars without even asking how much they’re trading for,” said a local bank trader, adding that the Central Bank intervened in the market to prevent the peso from falling even more.

In formal interbank trade ARS=RASL, the Argentine currency ended down 0.07 percent at 3.795/3.7975 per U.S. dollar. In informal trade between foreign exchange houses, the peso ARSB= weakened 0.39 percent to 3.88/3.885 per dollar. (Writing by Eduardo Garcia)

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