Financial uncertainty: Argentina's country risk again exceeds 700 basis points

For the moment, Argentina will stay away from voluntary debt markets. The country risk, an index that measures the quality of credit, remains at very high levels for the country, reflecting doubts about the solvency of the economy.

This Tuesday, the country risks once again exceeded 700 points base levels, similar to September 12, to reach the 708 units. The maximum score of 2018 was recorded on September 4th with 783 units.

The JP Morgan indicator measures the interest rate differential of US Treasury bonds with their counterparts in emerging economies.

Like the treasures to 10 years offer this Tuesday a profitability of 3.06% annual basis (306 basis points) in dollars, which is implicit in its quotation in the secondary market. If Argentina finances itself in the markets, it should Issue 10-year bonds with a rate greater than 10% annual

The increase in the rates required by the financial world to finance the Argentine Treasury doubled in 2018among the 351 country risk points with which Argentina started the year. The impossibility for the national state to obtain funds to cover the budget deficit at a reasonable rate was the basis on which the government of Mauricio Macri decided to go to Parliament. financial badistance from the International Monetary Fund.

At the current level, country risk has risen sharply in the middle of the period strong exchange rate fluctuations that have been transferred to macroeconomics.

Up and down since the beginning of the turbulence

As shown in the infographic, nine country risk milestones over the last seven months have been contextualized: from the beginning of the currency crisis to the highest peak of today.

At the beginning of the crisis, at the end of April, Argentina added the interest rate of the treasures at age 10 he was at 402 basis points, accompanying the perception of risk when the value of the currency has increased.

Over the next two weeks, he would arrive for the first time this year at 500 points. On this occasion, the Central Bank had intervened strongly in the foreign exchange market by presenting a bid of $ 5,500 million at a price of $ 25, lower than the closing of the dollar at $ 25.51. On the political front, the government has tried to provide security through a telephone call between President Macri and Donald Trump.

The following weeks were accompanied by increases until early July, the country risk reached 607 points. But, taking advantage of what ended up being a month of considerable peace on the exchange rate in which the dollar fell by 5%, by the end of the month, the 607 points had fallen back to 552.

One of the strongest moments of the increase took place during the first half of August, period during which the international market punishes Argentine badets for the double effect of a the economic current that started to go against emerging economies and the internal factor that triggered the cause of K bribes. This combination resulted in an escalation of country risk, which arrived on August 13 at 748 points, had a "valley" of 663 (August 16, with a momentary recovery of markets) and closed at a peak at 783 on 4 September, after the Minister of Finance Nicolás Dujovne announces new economic measures to achieve the zero budget deficit in 2019 as part of the government's strategy to secure a new agreement waiting with the IMF.

Since then, the cost of insurance of Argentine bonds began a downtrend until 21 September. day he hit the 588 points in response to the expectation of a new international market agreement waiting. At that time, Dujovne and President Macri's trip to New York, to attend the United Nations General Assembly and meet Christine Lagarde, Managing Director of the Fund, was perceived by market operators as a sign of an imminent announcement.

The IMF approved this week the revision of the accounts of Argentina. It is expected that it will allow the month of December approximately USD 7,600 million as part of the agreement waiting by $ 57,100 million, which guarantees repayment of foreign currency debt until 2020.

"The The Fund congratulates the local authorities for continued efforts to advance its economic reform agenda, including political support for budget approval, "said a report Search for traders.

For Gustavo Ber, economist Ber study, country risk does not give "given that worries grow concerning the 2020 financial program, which we have to go back to the markets debt volunteers abroad, in the current uncertain economic and political context ".

according to Matías Roig, from Portfolio Personal Inversiones, "there is not a lot of mystery in the reason: presidential elections between. Moreover, we understand that the probability of a greater compression of country risk -At least, concretely and strongly- will be limited in the coming months by the political scenario ".

Roig commented that for actions there will be a contagion in the citations of this weakness of sovereign bonds, because "until country risk improves, the possibility of a strong rally actions would remain rather limited ".

The rising country risk We clearly see in the exceptional rates that Argentine bonds offer on the secondary market, which are the reverse of the fall in prices. The Bonar 2020 pay a rate of 9.5%; the Bonar 2024, 11.5%, the Discount 203312.5%; the Bonar 2037, 12% and the call bonus "a century", Argentina 2117, (AC17), 10.25% annual in dollars.

Nery Persichini, Investment Manager of GMA Capital, considered that the foreign funds "stay away dollar bonds that expire beyond 2019, "good"they do not have the "mattress" offered by the Fund International Monetary Fund in case the next president could not contract a debt abroad in 2020. "

"The other verifiable maneuver is the jurisdictional selectivity. In case of maintenance of Argentine bonds, investors opt for those who are governed by New York law. Securities issued under foreign laws give, on average, 1 percentage point below of Argentine law, "added Persichini.