"Over the last few months, the Argentine government has actually been doing some quite good work to engineer a rapprochement with the markets," Nicholas Watson, a Latin America analyst at Teneo Intelligence, told CNBC, citing a $5 billion settlement with Spanish oil company Repsol over the seizure of its operations as well as settling other arbitration cases and reaching a $10 billion deal with the Paris Club of creditors.
But Watson noted that this default would undo a lot of the good work and likely deepen a recession already underway.
Read More Argentina faces 'shock' if it defaults: Debt pro
While a default would usually spur capital markets to give a country's sovereign paper the cut direct, bond investors aren't phased.
"The market is somewhat sanguine on the outcome here," Tim Seymour, chief investment officer at Triogem Asset Management, told CNBC Wednesday before the announcement.
"Distressed debt players across emerging are looking at Argentina," he added and expecting the country will be able to do some domestic issuance to meet funding needs.
Read More What happens to Argentina if it defaults (again)
Some noted that the bond rally is less stellar than it may appear. "If we consider a country like Paraguay, one of its near neighbors, you have a country with similar political risks, similar levels of solvency, trading at less than 5 percent," Bradford Jones, a portfolio manager at Sagil Capital, told CNBC last week.
But he noted, "If we do have a resolution to these issues, we could see yields compress in Argentina."
To be sure, some do expect a serious market impact within the country.
"Sovereign risk means that many businesses within the country will have trouble raising capital," said Mark Cymrot, a partner at law firm Baker & Hostetler, who worked on Peru's debt default. "To what extent companies within Argentina will be able to get credit, that's where you will see an impact, where it may have a big impact on the economy."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1