February 2, 2017 / 5:55 PM / a year ago

Argentine GDP warrants rally on improving economic data

NEW YORK, Feb 2 (IFR) - Argentine GDP warrants are rallying this week as investors bet that stronger economic data will soon translate into a payout.

The US dollar warrants were trading as high as US$10.30 on Thursday, up from around US$9.00 last week just before the government released data on January 26 showing that economic activity in November had jumped 1.4% month on month.

That marked the second month-on-month gain, raising hopes that Argentina’s GDP growth could eventually top 3% and trigger payment on the warrants.

“Accumulated strong data is creating strong conviction and putting the coupon back in play,” Siobhan Morden, head of Latin America fixed-income strategy at Nomura.

Prices have been further bolstered following reports that car sales had surged in January and that the government is further hiking electricity prices to cut fiscal deficits.

“If higher inflation (from electricity hikes) is not coupled with an accordingly weaker peso, which we believe is likely, it also will boost the value of the US dollar and euro warrants,” wrote an analyst this week.

Last year the government said it would offer investors options to retire the GDP warrants, but the finance ministry has yet to follow through with such plans.

Under that plan, the US dollar warrants issued in 2005 and 2010 could be sold back at US$10.25 and US$10.00 respectively, while euro and the peso denominated instruments had a sell-back price of 10.00. (Reporting By Paul Kilby; Editing by Jack Doran)

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