Investigations and football scandal: a difficult combo that hit Argentine bonds

Argentine bonds had another day to forget, resulting in a country risk above 700 basis points, after an increase of more than 2%. This development reflects Argentina's strong mistrust among investors. Little imported the $ 57,000 million package. For markets, there are other more important reasons for avoiding local badets.

The first two days of the week were a real blow to the Argentine debt. Dollar obligations in the medium and long term have fallen sharply. As a consequence, the major newspapers recorded a sharp rise in performance, which changes inversely with price. Most government-issued dollar securities yield between 10.5 percent per annum and 11 percent per annum. These rates are very high, which contrasts with the performance of most Latin American bonds, which are in the range of 5% to 6% per annum (and longer term).

TheArgentina has returned to "intensive therapy" in terms of market vision. It was also a generally weak day for stocks and only the dollar was "saved", which fell slightly after last days' hike, reaching $ 39.90. It was after a strong absorption of the pesos that the Central Bank proceeded, which resulted in the stopping of rates.

What brought the bonds to undergo a new wave of sales? According to the comments received by Infobae with brokers both local and external, two fundamental reasons dominated the agenda at the time:

1 – The polls are beginning to give Cristina Kirchner an edge over Mauricio Macri, similar to the one known to consultant Aresco at the end of last week. For very little difference in the first round, but would also win today at the ballot. Only a few weeks ago, Poliarquía had declared that at Wall Street 80% were convinced of the re-election of the current president and that 1% of them only considered that the old one president could take back power. But these percentages have surely varied. And this greater uncertainty is reflected in the price of debt.

2 – Saturday's frustrated match for the Copa Libertadores final, suspension and serious troubles, left more than a bitter taste among the fans of River and Boca. The scandal was topical all over the world, but many Argentine bankers were working in Miami and New York. On the way back, they pbaded on the experience over the weekend. The message that drove the debt operators was very hard about the country's governance this year and the government's mistakes in managing the crisis.

The political uncertainty is today much stronger than The fundamentals, which should trigger a price recovery. Disbursements from the IMF, for example, allow Argentina to stay out of financial markets until at least the first quarter of 2020. Meanwhile, maturing debt is paid, both in capital and interest. So, the possession of Argentine bonds will fall on the part of large international funds.

But this greater availability of funds than the Treasury has already contracted for debt in hard currency has had no effect on the price of bonds. On the contrary, the new country risk, going back over 700 points, shows a steady decline. For this reason, the fact that the dollar fell again in the local market was irrelevant.

The most affected titles are those with the longer term. Bonar 2046 lost nearly 2% and closed at 76.40 USD. At the beginning of the year, it was trading above 100 USD. Bonar 2036 lost 2.2% and sold more than 10% a year in dollars. The 2024, more conservative in theory, shows a performance higher than 11% and is among those whose behavior has worsened in recent days.

Even the short-term debt falls into the doldrums. Bonds maturing in 2020 and 2021 have suffered heavy losses and yielded more than 9% in dollars per year. This is explained by fears that a presidential change affects Argentine debt. So much Cristina Kirchner as Sergio MbadaFor example, they mentioned the possibility of "renegotiating" the agreement with the IMF. And doubts arise about the willingness to pay the debt in case they come to power.