Argentina says will pay all creditors in Buenos Aires

[Morganfleeman]

8. This is baloney of the highest order

The Supreme Court decision was broad-based with all but Ginsburg agreeing and Sotomayor recusing herself.

There is a solution to this problem. A country has a clear prerogative to issue domestic currency bonds under local law. Why don't they do so?

Because most investors would not touch these emerging markets bonds with a bargepole BUT FOR the protection of New York law. The overwhelming majority of investors in emerging market debt are not vulture funds, but sovereign wealth funds, U.S. and international pension funds and bond funds and endowments. These investors are going to demand a much higher rate of return from serial defaulters like Argentina if they are buying into local law debt, because these investors are potentially subject to cramdown should said sovereign decide it no longer wants to pay its debts.

Countries with poor credit ratings like issuing under New York law because it gives them better access to capital markets and a wider pool of investors. That is fact, otherwise they wouldn't do it. They certainly don't HAVE to subject themselves to New York law. The hallmark of sovereignty IS that freedom to decide what jurisdiction a country will issue bonds in.

Argentina was happy to accept the benefits of issuing under New York law at the time they issued, and they should accept the consequences. Rest assured that any future bonds Argentina issues under Argentine law will carry a much higher premium than its New York law bonds.