Bond Traders Have Already Cast Presidential Ballots in Argentina

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Daniel Scioli may be leading Mauricio Macri in Argentina’s presidential polls, but he’s trailing in a big way in the bond market.

The province of Buenos Aires, where Scioli has been governor since 2007, sold $500 million of six-year notes to yield 10.23 percent Tuesday. That’s about 2.25 percentage points more than those on similar bonds from the city of Buenos Aires, where Macri is mayor.

The sale is the latest gauge of investor preferences four months before Argentines vote to elect President Cristina Fernandez de Kirchner’s successor. While Macri has won over traders with pledges to undo policies that have stoked inflation and plunged the nation into default, Scioli is viewed less favorably because he belongs to Fernandez’s political party. Macri, who has been mayor since 2007, has also proven a better economic steward, with the city boasting debt levels that are half those of the province.

“Macri is perceived as someone who is more pro-market, who would solve Argentina’s macro distortions more quickly than Scioli,” Hernan Yellati, head of research at BancTrust & Co., said from Miami. “If you compare the city of Buenos Aires against the province, that perception is also reflected to some extent in the spreads.”

Buenos Aires province, which returned to the bond market for the first time in four years, said Tuesday it’s also seeking to swap holders of as much as $500 million of its 2015 bonds into the new 2021 securities.

Its $1.05 billion of 2015 notes mature in October.

Bond Default

Scioli’s press office didn’t return telephone calls or an e-mail seeking comment on whether bond investors favor Macri. The press office for Rogelio Frigerio, an economic adviser to Macri, also didn’t respond to an e-mail seeking comment.

Scioli is favored by 32.2 percent of voters, making him the leading candidate and topping the 29.9 percent support enjoyed by Macri, according to a poll by OPSM.

The nationwide house-to-house survey, which had a margin of error of 2.5 percentage points, canvassed 1,200 intended voters between May 8 and May 22.

Argentina’s peso was little changed Thursday at 9.008 per dollar as of 12 noon in New York.

Fernandez, who can’t run for a third consecutive term, has been unwilling to negotiate with creditors who rejected Argentina’s efforts to renegotiate debt after its 2001 default and instead won the right to repayment in U.S. court. In June, a U.S. judge banned the country from paying foreign obligations it issued in debt swaps until it pays New York-based hedge fund Elliott Management.

‘More Room’

While Scioli has said he supports Fernandez’s decision to reject the U.S. ruling, Macri has said he would negotiate with the creditors.

Buenos Aires city’s debt is equal to just 28 percent of its revenue, versus 55 percent for the province, according to research firm Economia & Regiones. The province spends 16 percent of its net current income on debt payments, more than three times that of the city.

“The city has more room to maneuver,” Veronica Sosa, an economist at Economia & Regiones, said by telephone from Buenos Aires. “It’s logical that they would ask for a differential,” referring to bond investors.

Yields on Buenos Aires city’s $500 million of notes due 2021 have tumbled 0.87 percentage point to 7.9 percent since the it issued the debt in February, data compiled by Bloomberg show.

While Buenos Aires province has bolstered its finances under Scioli in recent years, the city has a longer history of better fiscal management, according to Siobhan Morden, head of fixed-income strategy at Jefferies Group LLC.

“It all comes down to track record on fiscal management and debt dynamics and its always been stronger for the city,” she said.

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