"Toxic Trio" becomes duet as Argentina dollar bonds rally

miércoles 25 de marzo de 2015 12:06 GYT

By Chris Vellacott

LONDON, March 25 (Reuters) - Investors who have shunned the high-yielding dollar bonds of the "Toxic Trio" of Argentina, Venezuela and Ukraine may be kicking themselves after a strong Argentine rally over the last year.

While all three countries are rated deep junk by the big three ratings agencies, Argentine dollar-bond spreads over U.S. Treasuries -- the premium investors demand to hold the debt -- have fallen to about 600 basis points from more than 1,000 in the last year. Venezuelan and Ukrainian spreads, in contrast, have skyrocketed.

"The Toxic Trio is actually now the Toxic Duet because Argentina has done very well and gave up their membership this past year," said Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management.

This is despite the fact that Argentina is already in default, forced into that state by a U.S. court order to settle with "holdout investors" suing for full repayment of bonds restructured after a 2002 default.

Even as its legal dispute continues, Argentina's debt has rallied, and the prospect that it will see a change of government in elections later this year make it the most popular investment of the former trio.

"Argentina is a rosy story. Distressed investors have come in as the marginal buyer, and they are not the marginal seller," said Aberdeen's Edwin Gutierrez, adding that he took profits from an overweight position in Argentine bonds, bringing it down to neutral.

"Optimism stems from the idea we are going to get regime change at the end of the year, and the developments of late suggest it will be a market-friendly candidate," he added.

Venezuelan spreads have soared to around 3,000 bps from 1,000 in January last year, while Ukraine's have jumped to more than 4,000 bps from around 800 bps.   Continuación...