Argentina on way to meeting bond pricing target
By Paul Kilby and Davide Scigliuzzo
NEW YORK, April 18 (IFR) - Argentina was well on its way to achieving pricing targets on its first cross-border bond in 15 years after order books on the multi-tranche deal swelled to over US$50bn on Monday.
Strong demand for one of the few emerging markets turnaround stories has raised expectations of a final yield of 7.75%-7.875% on a 10-year tranche that is anchoring the deal's pricing.
Argentina set initial price thoughts of 6.75% area on a three-year bond and 8% area on a 10-year. A five-year is offered at 50bp below the 10-year yield, and a 30-year at 85bp over it.
Investors and the sovereign have been in a tug of war over pricing ever since the new government of President Mauricio Macri said it would raise up to US$15bn to settle claims with holdout creditors.
The finance ministry has been gunning for an average cost of 7.5% across all tranches, while many on the buyside have insisted that an 8% handle was required on the 10-year.
But strong demand for a deal that saw over US$25bn in indicative interest even before books opened will almost certainly mean the 10-year will price inside 8%.
"It should have been 8% [on the 10-year], but technicals and demand will probably overshadow fundamentals," said Sean Newman, a senior portfolio manager at Invesco Fixed-Income.
If the sovereign wishes to hit its average 7.5% yield, it will have to print a US$2bn three-year at 6.5%, US$6bn five-year at 7.25%, a US$5bn 10-year at 7.75% and a US$2bn 30-year at 8.6%, Newman said. Continuación...