Contagion from Argentine debt dispute limited

So far at least, financial markets in Argentina have largely shrugged off the fact that, barring a last minute deal with holdout creditors, the government now seems destined to enter a technical default on some of its debt obligations. As it happens, even if the government does default, this may not have a big effect on local markets – Argentina’s long-running dispute with holdout creditors is well documented, and some form of default may now be priced into the markets. Even so, the road ahead is likely to be bumpy. The good news, however, is that contagion to markets in the rest of the region has been limited – and we expect this to remain the case.