Argentina’s Pension Fund Sells Bonds to Boost Parallel Peso Rate

Argentina’s state pension fund sold government dollar bonds due 2018 to local investors yesterday for the first time in a bid to strengthen the peso in the so-called blue-chip swap market.

The agency, known as Anses, sold $2.7 million of the notes which were issued in a private placement in 2011, according to data compiled by the Buenos Aires Stock Exchange. The sale into the secondary market helped strengthen the implied peso rate to 9.17 per dollar from 9.31 a day earlier. Investors use the blue-chip swap market to obtain foreign currency by exchanging peso-denominated assets for dollar assets at a rate that is about 38 percent weaker than the official rate of 6.6246.

“This signals a greater intervention in the foreign exchange market at the cost of not selling the bonds abroad to accumulate reserves,” Alejo Costa, head of research at Puente Hnos Sociedad De Bolsa SA in Buenos Aires, said in an e-mail.

The pension fund intervention is part of efforts by President Cristina Fernandez de Kirchner to narrow the gap between the official and parallel exchange rates which have widened as the government tightens currency controls. As part of efforts to stem a 30 percent drop in international reserves in the last year, the government imposed higher taxes on foreign currency spending and is providing incentives for exporters to bring dollars into the country.

The measures haven’t halted a slide of the peso in the black market which plunged to a record 10.9 per dollar this week while reserves tumbled to $30.2 billion, the lowest since November 2006. The blue-chip swap weakened 0.5 percent to 9.22 at 11:25 a.m. in Buenos Aires.

The Anses investment fund, which was created after the nationalization of the pensions industry in 2008, bought the full $2.3 billion of the 9 percent notes that Fernandez issued in November 2011, the agency’s third quarter report shows.

Santiago Lopez Alfaro, deputy manager of Anses who oversees the pension fund’s investments, didn’t immediately return a phone call seeking comment.

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