NEW YORK, April 20 (IFR) - Argentina’s new bonds were up two to three points in the secondary market early on Wednesday, just a day after they were printed as part of an upsized US$16.5bn crossborder offering - the sovereign’s first in 15 years.
With a book that reached US$69bn plus, the deal - EM’s largest ever - is unsurprisingly being bolstered by accounts that were either unable to participate in Tuesday’s trade or received small allocations.
The long-dated 7.625% 2046s were proving to be the outperformers, jumping three points to a mid market price of 99.25 since pricing at 95.758 on Tuesday, said a New York based trader.
The 7.50 2026s were also up close to two points at 101.90, while the 6.875% 2021s had advanced more than a point to 101.85.
The shorter dated 6.25% 2019s were up several points at 101.60 mid-market.
The enthusiastic response to Tuesday’s bond underscored investor confidence in newly installed President Mauricio Macri, who has been quick to reverse the leftist policies of his predecessor.
The new finance team - led by former JP Morgan banker Alfonso Prat-Gay - have also rapidly settled with holdout investors who had effectively blocked the country’s access to capital market funding.
Proceeds from the sale will partly go toward paying major holdout investors, putting an end to the country’s long-running legal battle in US courts.
But some investors are still holding judgment on a country that still must tackle high inflation and a fiscal deficit that reached 7% last year.
The sovereign catered to those more skeptical accounts this week when it made a last-minute addition of short-dated 2019s, dubbed Macri bonds because they mature within the president’s first term.
These securities were a hit with investors who liked the carry but remained reluctant to take longer term exposure to a country that has had little patience with non-Peronist governments like Macri‘s.
“Some people are concerned about the long-term story of Argentina, as they have disappointed many times,” said Pierre-Yves Bareau, global head of EM debt at JP Morgan Asset Management.
“(The shorter-dated) bonds are a way for some people to re-engage cautiously and capture some carry and income.”
While the US$69bn plus book demonstrated the buyside’s new found love for Argentina, the South American country was also helped by an improving tone in emerging markets as investors once again put money to work in the asset class.
“Argentina is a symptom of a change in psychology,” said a New York based trader. “You have a US$65bn plus book for a serial defaulter. People in the short term tend to be myopic and are underinvested.”
Accommodative monetary policy in the US and Europe and reduced concerns about commodity prices has helped to encourage more risk buying in EM.
“It is difficult to be short on anything,” said the trader, noting that broader based asset buying from the European Central Bank could keep EM bonds looking cheap despite the recent rally. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)