Argentina Just Regained Access to Markets. Then Trump Came Along

  • Yields on Argentina’s 30-year bonds have surged since election
  • Macri is relying on investors to finance deficit until 2018

Donald Trump’s victory is complicating matters for Argentina’s still-new president.

Argentina, which regained full access to international capital markets just seven months ago, was caught in a emerging-market selloff this week after Trump was elected to succeed U.S. President Barack Obama.

Yields on the nation’s dollar-denominated bonds due in 2046 have surged about a half-percentage point to 7.4 percent since the Nov. 8 vote, and may rise to 8 percent, according to Walter Stoeppelwerth, chief investment officer at Balanz Capital. That would be the highest since President Mauricio Macri settled a bitter feud with holdouts from Argentina’s 2001 default in April.

In his first year in office, Macri is seeking to revive the economy, slow inflation that’s skyrocketed to 47 percent and strengthen the nation’s finances. A cornerstone of his plan is $35 billion in infrastructure spending next year that he says will kickstart growth.

“The entire Macri team’s economic model is based on the presumption that global investors are going to fund the deficit this year and next,” said Stoeppelwerth, who oversees $235 million in mutual funds. With bond investors retreating globally, “the idea that you’re going to be able to come back to the market and raise $15 billion to $20 billion next year comes into question.”

It’s not all bad news for Macri. Argentina has already issued $20 billion this year, enough to cover its financing needs until February. That gives Macri time to ride out the storm, Stoeppelwerth said.

“They were very shrewd to pre-finance,” he said. “It gets a little bit edgier if this is something that is more than that.”

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