Bonds, Emerging Markets, Frontier Markets

Argentina Returns To International Bond Market After 15 Years Of Isolation

argentina-marketsThe government of Argentina has finally returned to the scope of the international bond market as of April 18, which has thus ended 15 years of global financial isolation after the South American nation defaulted back in 2001.

Fulfilling a campaign promise and following favorable court rulings, Argentine President Mauricio Macri gave the green light for the sale of $15 billion in bonds that will help the  government finance its budget and pay money owed to hedge fund creditors dubbed as “vulture funds.”

The first offer took place in London early on Monday morning, where top Argentinean officials had visited investors the previous week.

The Macri administration has said that it intends to sell batches of 5-year, 10-year, and 30-year bonds, which will help the country payoff $8.5 billion to bondholders, with the remainder set to help balance the national budget.

Finance Minister Alfonso Prat Gay assured that the amount due to the bondholders will be deposited in the creditors’ accounts on April 22.

Attractive Argentina Bonds

Helping to pave the way for Argentina to finally return to the bond market comes on the heels of a visit to the nation by U.S. President Barack Obama which has seemed to smooth out relations, thus followed by a favorable ruling last week by the U.S. Court of Appeals.

As such, investors have rekindled their love for risk in the nation, hoping that Macri is the real-deal who can recover years of economic pain and lead Argentina to a economic rebound with a new wave of investment.

As it appears, so far, that the plan is working. The buildup to the total $15 billion debt issuance, has been “robust” as there is a “strong demand”, according to the Wall Street Journal (WSJ).

Here is the WSJ with more:

Argentina is receiving strong demand for a global debt offering that could reach $15 billion, attracting an array of investors looking for higher yields in a period of low interest rates.

The robust demand also has enabled Argentina to reduce the yield it must pay to attract investors. The 10-year tranche, which has received the most orders from investors, is likely to be priced with a yield between 7.5% to 7.625%, after initial price talk suggested a yield of 8%, according to people familiar with the matter. Other emerging-market 10-year bonds with single-B credit ratings are trading at about 7.47%.

Negative interest rates? No Thanks BOJ, ECB, and possibly Fed!

Market “pariah” no more, as Argentina offers yields that make investors drool. Here is more from the WSJ:

Argentina was a market pariah only a few months ago from years of dueling with creditors after the default. But the intense demand for its new offering is a sign that a long period of low interest rates has led many investors to overlook past sins if they are well compensated with high yields.

This also led to credit rating agency Moody’s recently upgrading Argentina’s sovereign rating from CAA1 to B3, which has appeared to also have helped fuel investor.

After years of global investment isolation and economic pain, Argentina appears to be on the correct footing at this point  led by Macri, but only time will tell if investment will continue to flow and the nation’s economy rebounds.


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