Negative-Yielding Corporate Bonds Are All the Rage in Argentina
- Argentine companies issuing notes that investors pay to own
- Demand shows desperation for safe havens amid capital controls
Argentina -- a serial defaulter that’s mired once again in heated debt restructuring talks with creditors -- may be the last place you’d expect to find negative-yielding bonds. But quirks of its capital markets have turned the country into a surprising hot spot.
Argentine companies issued a record $596 million of dollar-linked bonds domestically in the past two months, and about a third now pay negative yields. Local investors are lapping them up, willing to accept losses in dollar terms because the notes’ peso payouts are adjusted to account for swings in the foreign-exchange rate. Pessimistic forecasts call for the peso to drop as much as 50% within two years, generating returns for investors that dwarf any costs they have to incur from receiving negative yields.