Dollar Bonds: They Started the Year Up 7% and Estimate They Can Still Go Higher in 2023

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Argentine dollar bonds have started 2023 on the right foot. On just two wheels, stocks that have entered the Martín Guzmán exchange, earn up to 7%, which serves to extend the rally they presented during the last two months of last year. Analysts expect that, for various reasons, Argentine debt could have a bull year, from the minimum levels reached in mid-2022.

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Argentine dollar stocks ended the year with losses of more than 20%. The truth is that the prices rebounded more than 45% in the latter part of 2022, after hitting historic lows during the peso debt crisis and the change of economy ministers in June and July last year. They finished with the most gains on Wednesday, with Bonar 2030 leading the way, adding 2.8%, making it the top-earning bond in the first few rounds of the month.

Since the US market was down on Monday due to a holiday in that country, the sessions on Tuesday and this Wednesday were the most significant. Country risk, as measured by the JP Morgan bank, fell 1.9% and closed at 2,099 points, 5% lower than last Friday’s close. If the low point of 2022 is taken as a reference, this indicator is still 23% higher than the level it had at the beginning of last year.

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Delphos analysts noted that the recent investor interest may be due to the proximity of the coupon cut for restructured bonds in 2020. “The coupon cut is approaching for Argentine bonds: US$0.5 for 2029, US$0.25 for 2030, US$0.75 for 2035, US$1.94 for 2038 and US$1.75 US dollars for 2041,” they indicated.

Even if a swallow does not make spring, this improvement in prices portends for many market analysts a “less negative” year for dollarised debt, especially if, in view of the presidential elections, the market begins to perceive a change of political sign as a winner at the polls.

“The positions are multiplied by a ¨change of cycle¨, even when it is recognized that it will be a long year amidst a hectic electoral calendar and multiple economic challenges to manage”, explained the market analyst, Gustavo Ber.

In addition to local factors, there is a global component that explains why markets are viewing fixed income assets with a better eye, which could benefit Argentine debt. “In the sovereign curve, Argentine dollar-denominated bonds have performed well in recent months. The external climate is currently more supportive for the emerging world in general,” said Nicolas Max of Criteria.

“The behavior during the last quarter allows us to be more optimistic about the future. The Globals have had three consecutive months of gains, which has not occurred since their restructuring in 2020,” agreed Pedro Sciaba Serrate, of PPI.

“More supportive sentiment for emerging markets after the sharp fall in US inflation largely explains the late rally,” he added.

For the analyst, although an electoral change could be positive, the position that Fernandez’s successor government will assume with respect to the debt is fundamental. “Bonds continue to price restructurings very aggressively. If the restructuring scenario is less aggressive than what prices are pricing in, bonds will have a very attractive upside,” he said.

Source: Clarin

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