Global Angst Overwhelms Argentina Bond Optimism as Auction Flops

  • Argentina didn't sell any bonds, swapped some notes locally
  • Government planned to issue about $1 billion in sale, swap

The bond-investor optimism inspired by Argentina President Mauricio Macri is proving no match for the angst roiling financial markets from the U.S. to China.

Argentina didn’t sell any of its dollar-denominated notes due in 2020 at an auction geared to local investors on Wednesday, a day when the Dow Jones Industrial Average sank more than 560 points before paring losses. The South American country had planned to issue about $1 billion of the securities in a sale and debt swap with a maximum authorization for $5 billion in part to capitalize on soaring demand for its debt in the wake of Macri’s election in November.

“It was a tough day internationally to try to sell debt,” said Alejo Costa, head strategist at Puente, a Buenos Aires-based brokerage. “It appears the government wasn’t willing to pay the higher yields being demanded by the market.”

The failed sale shows how intensifying turmoil in global financial markets may make it harder for Macri to revive Argentina’s economy and help the nation regain access to international credit markets for the first time since 2001.

A Finance Ministry press official told reporters Wednesday in Buenos Aires that the deserted auction showed that dollar demand among local investors has largely already been met.

The 2020 notes rose 0.42 cent to 102.02 cents on the dollar at 2 p.m. in Buenos Aires, according to data compiled by Bloomberg. The yield on the 8 percent bonds has risen 0.14 percentage point this year to 8.1 percent.

The Finance Ministry also said Wednesday that investors exchanged $444 million of the country’s bonds due in 2017 for government debt maturing in 2020. The government had offered to give Bonar 2020 notes at 96 cents for each 100 cents of Bonar 2017 bonds along with a cash payment for future interest.

Jorge Piedrahita, the chief executive officer of broker-dealer Torino Capital in New York, said the terms of swap weren’t attractive enough to entice more investors.

“The offer was rather poor,” Piedrahita said by phone. “The global market played against the government. It just hasn’t stopped falling, so that didn’t help.”

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