Argentine Mutual Funds Block Redemptions as Locals Rush for Exit

(Bloomberg) — Argentina’s central bank is trying to stem investor panic and stabilize the mutual fund industry after many of the country’s biggest funds suspended investor withdrawals in the wake of the government’s default on $7 billion of local debt.

The bank offered to buy local notes held by the funds, providing liquidity that they in turn can use to meet a surge in investor redemption requests. The rush for the exits was so intense Thursday after the cash-strapped government announced it was forcing local bond investors to accept longer maturities that more than a dozen mutual funds halted withdrawals.

The payment delays and plans to seek a “voluntary” reprofiling with holders of longer-term debt are part of a series of dramatic measures announced this week by President Mauricio Macri’s administration to staunch capital outflows and stabilize the peso amid a deepening financial crisis. Late Thursday, S&P Global Ratings said the forced extension of local bond maturities constituted a “selective default.”

Overseas bonds extended their decline Friday, with notes due in 2028 sinking 1.9 cent to a record 38.3 cents on the dollar and bringing the monthly loss to more than 40 cents. The peso slumped 2.2%, extending its August drop to 26%.

Argentine assets sold-off across the board after an Aug. 11 primary election — which acted as something of a dry run for the actual Oct. 27 vote — showed that Macri, a free-market advocate, was trailing the leftist candidate Alberto Fernandez by a wide margin.


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