Illustration: Aïda Amer/Axios

Argentina and Ecuador are going to restructure their debts, and they're going to do so with surprisingly little drama.

Why it matters: Both countries are repeat players at this game, and it would be very easy for 2020 to resemble previous acrimonious fights. Wonderfully, however, it looks like that's not going to happen this time around.

The backdrop: I've long had something of an obsession with sovereign debt restructuring, where countries default on their creditors and replace their bonds with new instruments that generally carry concessionary interest rates. I love the larger-than-life characters, the high dudgeon on all sides, and even the glorious vocabulary of it — champerty and pari passu and contumaciousness.

  • By rights, then, I should be deeply immersed in the recondite details of the latest debt negotiations in Argentina and Ecuador. What kind of mischief is Argentina getting up to with its collective action clauses? Will Ecuador's finance minister manage to pull off a deal before getting impeached?
  • The catch: This time, such details don't really matter. The bondholders are mature long-term investors rather than avaricious vulture funds, and they're keeping their eye on the bigger prize, which is the continued health of the asset class more broadly.
Expand chart
Source: FactSet; Chart: Axios Visuals

Emerging market sovereign debt is trading near its all-time highs, after a nasty downward lurch in March. To look at it, you'd think there was no longer any financial distress at all.

The big picture: Now is a surprisingly good time for Argentina and Ecuador to restructure their debts, for three reasons.

  1. The case for a restructuring is crystal clear. Unable to print the hard currency they need to service their debts and pay for much-needed medical and other imports, emerging markets around the world are spiraling into a global recession they simply can't afford. The creditor community understands this. If shareholders of S&P 500 companies aren't worried about this year's earnings, then sovereign bondholders shouldn't care too much about the next few coupon payments.
  2. Thanks to swift action by the IMF and global central banks, sovereign bonds are trading at very healthy levels. If bondholders come to a deal, the new bonds they end up with will trade at low yields and be worth a lot more than any kind of paper in default.
  3. More defaults are coming, and a pair of constructive early precedents in Argentina and Ecuador will be very helpful in terms of providing guidelines for working out the debts of other countries. Bondholders will "get a deal done, set the right precedents, negotiate as a group and stand together, because there's more of this stuff coming," one bond-restructuring veteran tells me. "Starting on a bad path would not make sense."

The bottom line: Comity and cooperation are rarely hallmarks of sovereign debt restructuring. But the coronavirus seems to have conjured them onto center stage.

Go deeper

Updated 8 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Politics: Obama: Trump is "jealous of COVID's media coverage" Axios-Ipsos poll: Federal response has only gotten worse.
  2. Health: Hospitals face a crush — 13 states set single-day case records last week.
  3. Business: Winter threat spurs new surge of startup activity.
  4. Media: Pandemic causes TV providers to lose the most subscribers ever.
  5. States: Nearly two dozen Minnesota cases traced to three Trump campaign events.
  6. World: Putin mandates face masks.

Louisiana braces for 3rd hurricane in 2 months as Tropical Storm Zeta nears

Municipality workers clean the streets of garbage in Playa del Carmen, Mexico, on Tuesday that was left by Zeta, which struck the Yucatan Peninsula as a Category 1 Hurricane a day earlier — causing no major damage to infrastructure. Photo: Medios y Media/Getty Images

Tropical Storm Zeta is expected to strengthen back into a hurricane and bring dangerous storm surge conditions to parts of the northern Gulf Coast on Wednesday, per the National Hurricane Center.

The state of play: Louisiana Gov. John Bel Edwards (D) requested a pre-landfall Federal Declaration of Emergency in a letter to President Trump on Tuesday, ahead of the storm's expected arrival south of New Orleans.

2 hours ago - Technology

Trump's campaign website hacked

A screenshot of the Trump campaign website after it was hacked.

The Trump campaign website briefly went down and its "About" page was modified after hackers attacked the site Tuesday evening.

The big picture: With just seven days before the election, the hackers emulated the FBI and declared on the "About" page that: "this was seized. the world has had enough of the fake-news spreaded [sic] daily by president donald j trump. it is time to allow the world to know truth." Two addresses linked to the cryptocurrency Monero appeared on the site. Trump campaign spokesperson Tim Murtaugh in a statement said no sensitive data had been exposed in the attack.

Go deeper: Twitter hack raises fears of an unstable election

Get Axios AM in your inbox

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Subscription failed
Thank you for subscribing!