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Bond Chaos in Argentina Sparks Traders’ Rush to Provincial Notes

  • Cordoba, Mendoza and Chubut yields are below sovereign’s
  • Investors need just a few amortizing payments to be made whole

Just two years after Argentina’s latest default, traders are all but sure the country is heading toward another debt disaster. But amid all the doom-and-gloom, a surprising trade has popped up that’s produced rich rewards.

Investors are snapping up securities issued by the provinces of Cordoba, Neuquen, Mendoza and Chubut, turning them into the nation’s top performers this month. The rally has extended this year’s returns on some of the notes to as high as 13%, a somewhat remarkable feat given that dollar bonds globally suffered their worst quarter in almost six years. Sovereign debt has dropped 2.4% this month and 4.8% this year.