Bond markets have long memories -- ask Argentina
Published 09/10/2010 | 05:00
WHEN Argentina's financial crisis hit there was rioting in the streets of Buenos Aires for a month, but unrest in international debt markets was to last a whole lot longer.
Back in 2001, an economically crippled Argentina boldly announced to the world that it was "suspending" payments on its $132bn (€95bn) debt pile.
The decision triggered shockwaves. Two years later, Argentina's government began efforts to restructure some $75bn of the internationally defaulted bonds, offering those who had loaned money 25c for every dollar. A flurry of lawsuits followed, and Argentina was effectively locked out of the international bond markets for almost a decade.
Even when the country got its first fundraising away earlier this year, it had to pay investors an interest rate of 12.5pc, which puts Ireland's recent 6.5pc interest rate into perspective.
"People are still talking about Argentina and the Russian default of 1998," said one source. "The bond markets have very long memories."