Next July 9 is the date on which payment payments must be made. coupons in dollars of the AL30 and GD30 bonds for a total of US$1,139 million in interest and US$992 million in capital to private holders, in addition to US$403 million in interest and US$186 million in capital to public organizations. Together, this represents US$589 million for public holders and US$2,131 million for private holders, adding up to a total of US$2,720 million.
Some analysts believe that if the Government offered an exchange today, the rate would be 17% per year in dollars. However, if it were postponed to August or September, with an improvement in reserves and greater stability, the country risk would decrease, thus reducing the exchange rate. However, there are doubts in the market about the Central Bank’s ability to accumulate reserves in the current context.
Although the July 9 payment is assuredin the coming months and accompanied by a possible reduction in the country risk, the Government could consider an exchange of the AL30 and GD30 for bonds with longer maturities such as AL41. With the aim of facilitating a rollover.
Bonds: what the market analyzes
Fernando R. Marengo, chief economist at BlackTORO, mentioned in an interview with Bloomberg: “Many people say that if I take the AL30 or the AL35, they have gone up a lot. It does not mean that they are expensive. Today, the AL30 yields 25%, while that a comparable bond from Ecuador yields 18% and the rest of Latin America yields less than 7%. It is clear that the Argentine risk is much higher than that of the countries in the region“.
Marengo also explained that to evaluate any investment project, the country risk is taken as a reference, and Argentina is between 1,300 and 1,500 points, while the region is below 300. “Clearly, Argentine assets are very damaged. compared to the rest of the region,” he added.
“If we look at stocks, we are very cheap. If we look at the real estate sector, it is also very cheap compared to the region, with a very high discount rate. The key to any economic program in Argentina is to reduce the inflation rate, but At the end of the day, what must go down is the discount rate for the projects to be profitable in the country,” Marengo concluded.
Hard-dollar sovereigns: time to buy or sell?
Until early last week, the market had experienced a bearish streak. Argentine assets had accumulated more than a month in negative territory, which presented an adverse financial outlook for the Government. To regain market optimism, a series of good news was necessary.
“This positive shock came last Thursday, when the government achieved four milestones: the approval of the Bases Law, the renewal of the swap with China, the lowest inflation figure since January 2022 and the approval of the eighth review of the IMF. “commented Juan Pedro Mazza, fixed income strategist at Cohen.
This set of positive news was a respite for Argentine fixed income, which registered an increase of 8.7% in the week. However, Mazza highlighted that, despite this increase, Argentine Treasury credits are still below the maximums reached in April, with parities at 50% and a country risk of 1,381 basis points, when they had previously reached 55 % and 1,161 basis points, respectively.
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Until early last week, the market had experienced a bearish streak.
Depositphotos
At these prices, Mazza warned that Argentine fixed income continues to give high probabilities to an aggressive default event. He explained that, assuming an “exit yield” of 12% in line with the curves of emerging comparables, the price of US$ 58.5 of the GD30 (with an IRR of 22%) gives a probability of 53% to a reduction of the 39% (in line with the historical default average). Furthermore, he contemplates a scenario with a friendly haircut of 13% and another extreme with an aggressive haircut of 75% (similar to that of Argentina in 2005).
Finally, the expert concluded: “In view of the government’s willingness to pay and the important progress in correcting macroeconomic imbalances, these prices seem attractive. Even if the government were forced to carry out a debt exchange in dollars, it is “it is likely that this will occur on friendly terms for Argentine bondholders.”
