Minister Luis Caputo’s announcement of Argentina’s return to the debt market brings immediate positive financial impacts and improvements in bond prices. Argentine origins And a sign Normalization of the economy. The achievement of these goals will be linked to the final result of the operation, that is, how many dollars Argentina will receive and at what price, above the already confirmed coupon of 6.5%.
Because he put the debt under Argentine lawThis is a limited return. For Argentina to be present again in the international voluntary debt market, the issuance must be under New York law, as is the case with global bonds. To do this, the market expects Argentina to reach a lower risk level than the current one.
Despite this precision, it is clear that the action implies a strengthening of the path towards this goal, just as with placements Repo loans. To global banks after a long period without any money arriving this way.
Although it is an expansion of an already existing bond (Bonar 29 or AL29) with local legislation, it is A relevant intermediate step towards the eventual return to international markets This allows Argentina to normalize its debt management: canceling interest and refinancing capital, as is done in most countries in the world.
Beyond this focus, the government’s decision strongly removes the possibility of unilateral restructuring, default, or any other alternative in the management of Argentina’s public debt. Although for many analysts there are many outstanding monetary and exchange issues, a reasonably successful deposit amount for this operation would remove any specter of this kind for investors in Argentine bonds.
From a macro point of view, it is a Normalization sign Without a doubt. “Everyone will have their opinion on Miley’s government. But Argentina’s return to the credit markets is not an ideological issue. It’s a necessity“, summed up the economist Javier Timmerman.
The first impact that the government expects is Recover reservesThis is one of the points most noted by analysts (and the IMF itself) at this stage of the programme. In the short term, Caputo promises to cover “part” of the January 9 maturity with this issue, which is equivalent to saying that it will not be necessary to use reserves to pay it off in the same proportion.
It will also represent a regarding sign Interest rates for the private sector. A wave of negotiable private sector commitments has been implemented in recent weeks, focusing on the energy sector, without reference to the interest rate on sovereign bonds. The same happened with provincial governments’ emissions. The rate received by the government will serve as a benchmark in this sense and should help improve access to finance.
In the short term, access to the dollar debt market also contributes to this Deactivate currency depreciation expectations. The Treasury will have less need to purchase foreign currency to cover its foreign currency obligations, leaving more dollars available for supply in the exchange market. However, Caputo used this announcement to shoot that down Now the central bank will buy dollars within the exchange range.
On December 10, the two data that will be revealed to the market starting today will be known: How much money will Argentina get and at what price?. On the first point, the economics announcement noted that the invitation to bids makes it clear that the funds obtained will be used to “partially cancel” the Bonares 2029 and 2030 capital entitlements on January 9.
These benefits amount to 1,200 million US dollars, of which 138 million US dollars (11% of the total) are in the hands of the state. Eric Ritondalechief economist at BridgeHe pointed out that with sufficient liquidity in dollars available in the local market, he hopes that the treasury will replenish that amount and raise additional funds. “In this way, the economic team will be able to present the operation as successful and as an important first step to reopening dollar financing through market mechanisms,” Ritondel added.
He said that this announcement “is positive as a test example, although it is still a purely local proposition aimed at raising dollars, something that the government has not yet been able to solve in depth.” information Juan Manuel Trovaboss discordant. He risked how much the government would pay: “The rate would probably be around 10% according to the curve; under local law, this makes sense, but the relatively high coupon makes it more competitive compared to the rest of the curve and could help with Pricing end”.
The issuance announcement does not include minimum amounts, so the other central variable will be present. “The announcement looks very positive to me. The key is the number of dollars they were able to raise. If the province of Santa Fe raises US$800 million at 8,375% interest, I think Argentina should get much more than that, which will certainly have to give them a slightly higher interest rate.” Javier CasabalFrom AdCap Financial Group.
The interest rate on the last repo loan in June was 8.25% for two years. The IRR of Bonar 29 bonds, which will be reissued, is approximately 10.5% according to yesterday’s closing values. We cannot expect Argentina to pay returns below these levels.
The announcement also came amid a cooling of issues related to swaps or debt buybacks. “I think it’s with this the addressCasabal noted that bonds should once again approach their maximum values.