Market welcomes new Argentina inflation index; bonds jump

viernes 14 de febrero de 2014 13:23 GYT
 

BUENOS AIRES Feb 14 (Reuters) - Argentina's newly unveiled inflation index sparked a positive reaction in financial markets on Friday, as investors welcomed signs that the government had begun to report more credible economic data.

The revamped consumer price index, published on Thursday, reported inflation of 3.7 percent in January. That was welcomed by economists as an apparent "genuine effort" to narrow the gap between private estimates and official figures, which were widely discredited.

"Credibility around this new inflation measure will need time to build up, but the first print was undeniably encouraging," said brokers at BNP Paribas.

Investors, however, will want to see more signs that the change was permanent, analysts said.

"This really has to be accompanied by more signs of compromise," said Management & Fit in a report. "(The government) is suffering from a severe lack of confidence that can only be resolved with time."

The move is seen as a sign that the government of populist President Cristina Fernandez is more serious about rebuilding its damaged relationship with the markets as well as the International Monetary Fund, which had censured Argentina for the inaccuracy of its official data.

Government debt jumped on Friday, with peso-denominated, inflation-linked bonds seen as most likely to benefit from the change in methodology. Argentina's 12.5 percent discount notes were the strongest performers, up by an average 25 percent.

The local peso appreciated slightly, up 0.16 percent against the dollar, while on the parallel, or "black market," it rose 1.27 percent.

The benchmark MerVal stock exchange rose 1.76 percent.

A sharp 17-percent devaluation in the peso in January sent a shudder through global markets and was seen as a factor behind the high inflation reading. (Reporting by Walter Bianchi and Jorge Otaola, writing by Rosalba O'Brien; editing by G Crosse)