Argentine Bonds Gain as Primary Indicates Chance of Runoff

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Argentine bonds rallied after the nation’s presidential primary elections signaled the candidate from President Cristina Fernandez de Kirchner’s ruling party is unlikely to win in a first-round vote in October.

The nation’s dollar bonds due in 2033 rose 1.25 cent on the dollar to an eight-week high of 100.75 cents at 1:03 p.m. in New York. While holders haven’t received interest payments in more than a year, the notes have gained 14 percent over that time on speculation Fernandez’s successor will unwind policies that helped trigger Argentina’s second default in 13 years.

With about 98 percent of ballots counted, the results of the Sunday election imply that Daniel Scioli, the ruling Victory Front alliance candidate, won’t get enough votes to win in the first round of presidential elections Oct. 25 and will face opposition leader Mauricio Macri in a runoff. Macri has campaigned on pledges to change policies that have fueled inflation, slowed economic growth and prevented the nation from raising money from international markets.

“The results suggest that even if Scioli wins, the demand for changes is strong,” Alejo Costa, a strategist at Buenos Aires-based Puente Hnos SA, said in an e-mail.

Scioli won 38.41 percent of votes counted in preliminary results, while the opposition alliance headed by Macri received 30.07 percent support. Sergio Massa’s dissident Peronist alliance known as UNA obtained 20.63 percent. The leading candidate needs 45 percent of the votes or more than 40 percent with a margin of victory of 10 percentage points in October to avoid a run-off Nov. 22.

The extra yield investors demand to own Argentine bonds over Treasuries fell 0.21 percentage point to 5.71 points, according to data from JPMorgan Chase & Co.

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