Country risk slowed down to 944 points – 25/04/2019

Investors' doubts about Argentina's political future and the possibility that the country will not be able to meet its maturities after 2020 have raised the risk for the country at risk. 963 basis points on Wednesday, an increase of 11%.%.

And Thursday, it seemed that bleeding would not stop: the risk reaches 1,009 points (values ​​of February 2014) to then start backing up and set to 740, 2% less than Wednesday.

This Thursday, Argentine bonds in New York came to deposit up to 2.80%. The dollar loan maturing in 2021 has a yield of 20% (the US 10-year Treasury yields 2.4%). This floor has tried the riskiest to buy and reverse the sharp decline in sovereign bonds.

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Country risk is the surtax that a state has to pay compared to US bonds to go into debt.

At the same time, Argentine stocks in New York, down to 14%, also reduced losses, with losses of up to 7%, while in Buenos Aires the Merval lost 3.1%.

Why did the country risk a rise of 11% yesterday and that today the red has not stopped? The negative international environment that has led to the strengthening of the dollar worldwide and the departure of riskier markets from investors adds to the local political noise, in which investigations are beginning to circulate that give Cristina Kirchner a chance to defeat Mauricio Macri. in the October elections.

"The weakness of foreign exchange markets in emerging countries with the investor skepticism about recent measures The Macri government has announced that its government will fight against still high inflation would punish Argentine badets, "he said. Ilya Gofshteyn, Standard Chartered exchange strategist in New York at the Bloomberg agency. "The internal political context is undoubtedly a matter of concern as we approach the elections."

As, Mauro Roca, director of emerging markets at TCW, believes that "electoral uncertainty will boost badet prices in the short term." The markets react negatively to the possibility of a return of a populist administration. nobody can project with certainty the result of the elections presidential

"Paradoxically, the financial volatility fueled by the risk of populism's return goes against Macri's stabilization effort, which increases the chances of victory for a populist candidate," added Roca. "The government should try to break this perverse politico-economic cycle as quickly as possible in order to maintain its competitiveness during the presidential elections, while bond prices could continue to fall until they incorporate a high probability of the worst case" .

Shamaila Khan, head of emerging debt at AllianceBernstein in New York, said the wave of selling Argentine bonds "is motivated by the strong positioning of investors who have underestimated the electoral risk". We believe that the electoral risk has not been properly taken into account we do not think this is the case. "