Argentine bond markets rally on currency policy announcements
Last edited Wed Dec 18, 2019, 10:07 AM - Edit history (1)
Argentine bond markets rallied today on announcements by Economy Minister Martín Guzmán of policy changes designed to limit capital flight.
The nation's most commonly subscribed sovereign bond, Bonar 24, rose 7.4% - and peso-denominated issues rose as much as 13.5%.
JP Morgan’s Emerging Markets Bond Index (EMBI+) country risk for Argentina - the interest premium paid over U.S. Treasuries - fell 146 basis points to 1968, the lowest in two months.
The rally took place after Guzmán announced a 30% surcharge would be applied to dollar purchases as well as on the purchase of services charged in dollars.
"What we're doing is protecting the few reserves we have, to prioritize production - which requires imported supplies," Guzmán noted.
Twin crises
Argentine bond prices have risen steadily since Guzmán and President Alberto Fernández took office on December 10, with the popular Bonar 24 issue up 17.5%.
They inherited twin economic and debt crises from the right-wing Mauricio Macri administration - including a $45 billion IMF debt, 52% inflation, and a sharp recession.
Most other currency restrictions - notably a $200 monthly dollar purchase limit - had already been enacted in September and October by Macri in a dramatic policy about-face.
Macri had lifted most currency regulations four years earlier - prompting a doubling in the public foreign debt to over $200 billion as capital flight soared.
Debt obligations over the next four years total over $148 billion, with the country's projected $15 billion trade surplus for 2019 dwarfed by nearly $20 billion in foreign debt interest.
"We need a good-faith conversation on the country's ability to service its debts," Guzmán concluded.
At: https://translate.google.com/translate?hl=en&tab=wT&sl=es&tl=en&u=https%3A%2F%2Fwww.ambito.com%2Ffinanzas%2Fsp-merval%2Ftras-los-anuncios-guzman-volaron-135-los-bonos-y-el-riesgo-pais-perforo-los-2000-puntos-n5071746
Argentine Economy Minister Martín Guzmán in today's press conference, in which he outlined measures to limit capital flight and to increase pensions (which have lost 20% of their real value since 2017).
Guzmán faces twin debt and economic crises inherited from Mauricio Macri's 2015-19 tenure, and bond markets have reacted positively to his efforts on debt sustainability.
"The country was ran into debt brutally over the past four years - but the debt was not used to increase productive capacity that would have sustained high dollar outlays," the Columbia University academic noted.
"That's the reality, and everyone recognizes it."
