Argentine bonds rallied in Buenos Aires on Thursday after a U.S. appeals court decision gave the country an unexpected reprieve in a legal battle with holdout creditors that had raised fears of an imminent default.

Sovereign bonds rose 5.2 percent on average in over-the-counter trade, while dollar-denominated GDP-linked warrants surged 22 percent in opening deals on the Buenos Aires Stock Exchange.

(Reporting by Jorge Otaola and Walter Bianchi; Writing by Helen Popper; Editing by Chizu Nomiyama)