Argentina bonds recover after sliding on confusion over Milei's crypto post

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By Libby George and Marc Jones

LONDON, Feb 18 (Reuters) - Argentina's international bonds recovered most early losses on Tuesday, as investors shrugged off the risk to President Javier Milei's position after he was embroiled in a row over a little-known cryptocurrency that crashed.

Late on Friday, Milei recommended the crypto coin $LIBRA in a post on X, kicking off a brief rally. He later deleted the post and denied having any link to the cryptocurrency, which soon plunged.

The country's fintech chamber said the case could amount to a "rug pull," a scam in which a coin's backers lure multiple investors, sending the cryptocurrency's value soaring, then quickly withdraw their funds.

Argentina's 2030 dollar-denominated bond fell nearly 2 points as markets reopened on Tuesday after the weekend. But they recovered roughly half the lost ground to stand at roughly 80 cents on the dollar by 1515 GMT, traders told Reuters.

Investors have cheered Milei's austerity crusade since his 2023 election, and have bet the rally could continue even after some stocks and bonds hit records last year.

Any threat to Milei's position or reforms would concern foreign investors placing cash in the country. But most shrugged off the opposition's threats to impeach him.

Bruno Gennari, emerging markets strategist with KNG Securities International, said the chance of the scandal escalating into impeachment was "not likely."

"I think the opposition still has incentives to cooperate with Milei, as their voters still prefer them over the alternatives," he said, adding that the scandal had not directly impacted the economy or most of the population.

Thierry Larose, portfolio manager with Vontobel, also said that investors for now do not see Milei at risk, and noted that global U.S. dollar bonds fell 1.5%-2% before recovering.

"But he has certainly spent some political capital, with the cost potentially surfacing during the midterm election campaign later this year," Larose said. "Investors will now focus on tangible milestones."