Like all emerging market debt, Argentine bonds saw another round of declines on Thursday. Securities in dollars lose up to 3% after midday, which leads to touching the accumulated monthly contributions reds above 14%. Thus, the country at riskwhich measures the JP Morgan bank, jumped by 1.4% and settled at 2,024 pointsa sign he hadn’t seen since the second week of January.
Almost a month ago, on January 18, Sergio Massa’s economics team came out to announce a buyback of dollar debt securities “a keep parity” AND accelerate the fall in country risk. The high level of this index not only keeps Argentina as a nation away from credit markets, but also provinces and companies.
In that period there had been an interesting drop in the indicator, which had started the year above 2,100 points and in just under two weeks had supported by 300 units.
“We have seen a drop of a thousand points or more in the country risk in Argentina and it is a window. That is why we have made the decision to carry out a buy-back process of Argentina’s external debt of more than a billion dollars which starts today” , the Minister had said the day of the announcement.
But, beyond the initial euphoriaand the dollars that the Central Bank sold in order to take possession of the bonds, as the market had foreseen at the time, the provision had no significant effects. Argentina’s debt continued to move in tandem with that of other countries in the region, most notably Ecuador.
Thus, after having closed the first year with positive returns, since the beginning of February the bonds have collapsed. The global market is attentive to the signals that the US Federal Reserve could give regarding its interest rate policy. This Thursday, wholesale inflation data from that country suggested as much headline inflation persists, which suggests that the Fed could once again tighten its monetary policy.
“As we said at the time, if the operation was aimed at controlling free dollars, the stock of bonds on the market would not change and the value of pars would be fixed on the basis of other fundamentals,” said Pablo Repetto, of Aurum . Values.
“Furthermore, the persistence of debt reporting through REPO probably has worried some investors because to get the REPO a debt of several billion dollars would have to be issued, which would increase the potential supply of bonds in a market with low demand” added Repeto.
The debt buyback, sharply criticized by the opposition and questioned by several market players, has caused the government to spend the last four weeks just over $600 million, according to market estimates. This, at a time when the entry of dollars into the country has once again reached its lowest point and the outflow of reserves from the Central Bank has accentuated.
On the stock exchange, Argentine companies are solid. ADRS, the newspapers of local companies listed in New York, recorded increases of up to 6.5%, with Tenaris in the lead. This somewhat boosts the local stock market, where the Merval index rises by 1.5%.
Source: Clarin
