Argentina Succumbs to Bond Turmoil as Macri Euphoria Cast Aside

  • Country's bonds sink 3.9%, twice emerging-market average
  • Argentina's benchmark notes hit nine-year high last month

Argentina managed to sidestep an emerging-market bond rout late last year on optimism newly elected President Mauricio Macri will end the nation’s isolation. But now, the deepening selloff roiling global markets is proving to be too much for investors to ignore.

The country’s dollar-denominated notes have lost 3.9 percent this month, more than three times the average in emerging markets, data compiled by JPMorgan Chase & Co. show. Its benchmark bonds due in 2033 have slid 4.1 percent from a nine-year high reached Dec. 30 and are now trading at the lowest price since Macri was elected Nov. 22.

While Macri has followed through on promises to dismantle currency controls and start negotiations with disgruntled creditors since taking office last month, the turmoil in global markets fueled by plunging commodity prices upended a plan to sell local notes and fueled the decline in overseas notes as investors dumped risky assets. Argentina’s foreign debt is rated Caa2 by Moody’s Investors Service, eight levels below investment grade. Standard & Poor’s has a SD, or selective default, grade on the debt.

“There’s been a strong risk-off in emerging markets, and even if Argentina has been separate from other global trends, it’s not immune,” said Joaquin Almeyra, a fixed-income trader at Bulltick LLC. “You’ve seen a lot of pain across Latin America and this was a question of contagion.” 

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