Sovereign Bankruptcy, Day One: Market Rallies

Mark makes an immensely important point in his post on the latest in NML v. Argentina; it merits emphasis and perhaps an extension. The fact that a U.S. federal court proposed departing from sovereign bond contract terms is a big deal--even if the range of acceptable departures turns out to be small (de-acceleration?), and even if Argentina declines the invitation. A regime where a court enforces involuntarily modified contracts looks like sovereign bankruptcy, achieved here using the court's equitable powers against the background of the debtor's immunity. 

This echoes the idea that Marcus Miller and Dania Thomas proposed some years ago, when they interpreted the totality of Judge Griesa's rulings as proto-bankruptcy. Of course that was before Judge Griesa got fed up. 

I am not exactly holding my breath for a constructive response from Argentina, or acquiescence from Elliott. But even if nothing happens, my sense is that we have crossed a sovereign bankruptcy milestone. And markets rallied.