Argentina Eyes Another Source of Bond Cash With Local Sale

  • Finance Ministry to sell fixed-rate peso bonds on Sept. 1
  • The country last sold similar securities nine years ago

Argentina is tapping another corner of its bond market to raise cash amid a recession.

On Sept. 1, the Finance Ministry will sell fixed-rate peso bonds for the first time in nine years. The sale of the two-year securities comes after the government raised a record $19 billion in foreign bond markets in its first such offering since 2001. Argentina also has begun issuing floating-rate and inflation-linked debt in recent months.

President Mauricio Macri is seeking to capitalize on soaring investor demand for Argentina’s high-yielding debt since he took office last year. While his move to end a decade-long legal battle with creditors and unwind currency controls have won over bond buyers, the South American nation’s economy has contracted for three straight quarters, increasing the need for more borrowing.

“It’s spectacular news to see the government start to develop a peso curve,” said Marcos Buscaglia, the founder of Buenos Aires consultant Alberdi Partners. “It’s been worrisome to see that most of the government issuance has been dollar-denominated, both abroad and at home with its Treasury notes, which carries higher risk if the currency continues falling.”

Buscaglia estimates the bonds will yield around 29 percent. While the central bank sells its own fixed-rate notes every Tuesday, their maturities range from 35 days to 252 days.

“It’s a good move by the ministry that shows they’ve been reading investor momentum, because the market is demanding longer peso instruments,” said Juan Pablo Vera, the head analyst at Buenos Aires brokerage Tavelli & Cia.

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