Investors who decide to keep their exposure need to be willing to go through a technical default, which not only involves the risk of a significant sell-off, but also the threat of complicated and lengthy litigation or settlement processes. Investors who are not willing to go through such turbulences are advised to sell their Argentine bonds

Dear reader,  Argentine bonds have come under renewed pressure due to an upcoming US Supreme Court decision. Our scenario-based analysis concludes that a positive outcome for bond investors is more likely, and might even lead to positive returns over the next six months. However, we also attach a high probability to a negative scenario, in which returns would be significantly negative or Argentina even misses payments. The high uncertainty and the binary nature of the possible outcomes weigh on the risk-adjusted returns of Argentine bonds. Current yields do not adequately compensate investors for these risks, in our view. Investors who decide to keep their exposure need to be willing to go through a technical default, which not only involves the risk of a significant sell-off, but also the threat of complicated and lengthy litigation or settlement processes. Investors who are not willing to go through such turbulences are advised to sell their Argentine bonds.

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