Just as Bank of New York Mellon was preparing a notice to holders of Argentinian government bonds that the country was, effectively, in default, the issuer's own officials denied that scenario and demanded justice for U.S. creditors in the International Court of Justice.
Shortly after 7:30 am Thursday, BNY Mellon, which handles a key portion of the disputed bonds, issued a notice to Argentina's creditors stating that it was still holding roughly $539 million in payments the country had intended for certain bondholders as part of a federal court order that had prevented the bank from distributing the funds.
Given that the final deadline for distribution was the end of the day Wednesday, that notice was the first formal, third-party indication that Argentina had reached a state of default—even though BNY Mellon didn't actually use the word.
Meanwhile, in Buenos Aires, Argentine Cabinet Chief Jorge Capitanich insisted that his country was not in default, and that it was an "incompetent" mediator, hired to broker a settlement deal between Argentina and a small handful of bondholders, who was partly responsible for the day's events.
Argentina had deposited the funds it owed to the majority of its creditors in June, Capitanich noted, and "malpractice" in the U.S. court system, where a judge had ruled that those funds could not be paid until a small group of dissatisfied creditors were paid as well, had prevented those payments from being made. Capitanich indicated that Argentina may take its despute to the International Court of Justice at the Hague in the Netherlands.
A minute after midnight on Thursday, NML Capital, a subsidiary of the $25 billion hedge fund Elliott Management, which had spearheaded the holdout creditor group, issued a statement noting that a slew of "creative solutions" to the impasse between the bondholders and Argentina had been rejected, and that it was Argentina's choice to default.
Emerging-market investors were watching the events closely, but seemed largely unconcerned about a broader market impact.
"On the margin, I think none of this is helpful," said Rohit Gadkar, a portfolio manager at the Barcelona-based Trea Capital who owns Argentine debt. He added that efforts by Argentina's banks, which are gathering funds to pay off the holdout creditors on their country's behalf, are providing hope of a quick resolution.
"Until that situation clears up, we may not get the crazy downside reaction," Gadkar said.
Earlier Thursday, an emerging-market bond trading association had advised its members to trade Argentine bonds on a "flat" basis, in other words, assuming, for the moment, that no interest payments would be made.
—By CNBC's Kate Kelly. Reuters contributed to this report.