Argentine Bonds Climb as U.S. Stock Gains Feed Demand for High-Yield Debt

Argentine bonds advanced for the first time in three days as gains in U.S. stocks fueled investor appetite for the South American nation’s high-yielding debt.

The yield on Argentina’s 7 percent bonds due 2015 slid two basis points, or 0.02 percentage point, to 11.41 percent at 12:08 p.m. New York time, according to Bloomberg pricing data. The bond’s price rose 0.1 cent to 82.85 cents on the dollar.

Bonds slid for two days after Economy Minister Amado Boudou on April 15 unveiled the general terms of the country’s plan to restructure $20 billion in defaulted debt held out of a 2005 settlement. Some investors were disappointed by the government’s decision to exclude past payments on warrants linked to gross domestic product, said Siobhan Morden, a debt strategist with RBS Securities Inc. in Stamford, Connecticut.

“There was some profit taking, but not much” following Boudou’s announcement of the settlement offer terms, Morden said in a telephone interview today. “Risk appetite remains strong and that supports Argentina with its high-yielder status and not much competition.”

Argentina will offer investors 33.7 cents on the dollar for securities due in 2033, warrants linked to gross domestic product, and pay past due interest with 8.75 percent bonds due in 2017. The government will also open the exchange to bondholders who participated in the 2005 settlement.

Consob Delay Likely

Italian regulator Consob is likely to delay until next week a decision on whether to approve Argentina’s offer after Argentina made changes to it last week, said a person familiar with the matter, who asked not to be identified because the review hasn’t been completed.

Regulator backing in Italy, a country that is home to tens of thousands of individual investors who hold defaulted Argentine securities, is the final approval the country needs to start the restructuring offer, Boudou said yesterday in Buenos Aires.

Boudou’s announcement last week included changes from a swap document filed with the Consob last month. Among changes, Argentina is offering individual creditors a cash payment for past due interest instead of a bond, while the new 2017 bonds will only be dollar-denominated, Morden said. A penalty for larger-size creditors was changed so that it only affects investors who enter the exchange late, she said.

‘A Few Sweeteners’

“People have focused on the exclusion of the past-due payments on the warrants, but there were a few sweeteners there,” Morden said.

The government believes a settlement with remaining creditors will help Argentina regain market access and credibility among investors nine years after the government defaulted on $95 billion of debt.

Holders of defaulted Argentine debt including Greenwich, Connecticut-based investment fund Gramercy, and Stone Harbor Investment Partners in New York, said they haven’t made a final decision on whether to participate in the exchange.

TFA, the group that represents some 180,000 Italian individuals holding Argentine defaulted bonds, said it will evaluate the exchange after the country’s market regulator Consob completes its review of the offer.

Argentina’s peso slid 0.2 percent, the most this month, to 3.8713 per U.S. dollar, from 3.8632 yesterday. The peso headed toward its first winning month this year on dollar inflows to soybean and soy oil exporters amid the annual harvest, which is projected to be a record.

Argentina is the world’s biggest soy oil exporter and the third-biggest soybean exporter.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net.

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