Due to the strong fall, the dollar bonds are worth the same as in the previous default of 2001

Argentine history seems determined to agree with Carlos Gardel, who decades ago sang that 20 years are nothing. Because if “Back” is about, the Sovereign bonds are strictly following the premise and already are worth the same as in December 2001, before the default.

Today the bonds are at default prices. The abrupt fall of the debt leads local fixed income to operate in a context of strong financial stress, which implies that the market speculates with high chances of seeing a credit event in the short or medium term.

Before the default of 2001, the global ones that expire in 2008 and 2030 (not the current AL30) operated with parities of US $ 32.2. The selloff Current debt pushed bonds to similar valuations.

The abrupt fall in bonds during 2001 led the debt to operate from levels of US $ 80 on average in June to levels of US $ 32 in December of that year. The odds of default at that time soared, and finally the credit event came weeks later.

Today the debt undergoes a similar process

Bond parities recently collapsed to levels below $ 32, exactly the same values ​​with respect to what operated in 2001 before the default. Parities have suffered a selloff remarkable hand in hand with the fall of bonds in recent weeks.

Nery persichini, Head of Strategy at GMA Capital, warns that behind bond prices there is an implied probability of default of 97% at 10 years.

“The doubts about the agreement with the IMF and the absence of news about a growth plan with a sustainable fiscal path pushed the market to expect a new, more aggressive restructuring in the coming years. The prices speak of a haircut about him recovery value of more than 70% since 2025, when the maturities of the new restructured securities reach US $ 9.5 billion, “said Persichini.

According to their data, when decomposing the yield of Argentine bonds, the risk-free rate explains 9% and the spread Latam, 21%. The remaining 70% of the financial cost responds to the Argentine idiosyncrasy or to the factor “it’s us”.

High probability of default

Ultimately, what Persichini explains is that the Globales today have the same parity as the bonds 20 years ago, when Congress applauded the default of Rodriguez Sa.

That is, the Globales have today, 15 months after the Government restructures the debt, the same value that the Globales had in 2001, when Argentina was entering a credit event.

Analysts at Portfolio Personal Inversiones (PPI) point out that, with prices up to today, and considering that there are still four wheels left to close November, it is now three consecutive months that Argentine securities have accumulated drops of between 4% to 6%.

“In this frame, the four-year cumulative probability of default hit new post-restructuring highs standing above 83%. “, they commented.

Argenfunds analysts warn that the fact that the prices of the securities issued in September last year are trading at minimum values ​​creates a high implicit probability of default.

An agreement with the IMF is key, since it will clarify how the economic course will be in the next two years. The announcement of the sending of a bill with a multi-year economic program agreed with the staff The IMF did not finish convincing investors, who still remain concerned about the concrete progress of said plan, “they argued.

With the same vision, the analysts of Portfolio Personal Inversiones (PPI) highlighted that, although the electoral result increased optimism for 2023 and defined a new political map within the Congress with a power distributed among the different political forces, political and economic uncertainty did not dissipate.

“The bond market takes note with reds along the entire curve. The average rate hit a new post-restructuring high and the cumulative probability of default remains above 82%,” they said.

Looking at the IMF

Both the local and international law curves are inverted, with parities below 35%, which is why the market assigns high chances of seeing a credit event in the medium term given that it distrusts the capacity and / or willingness of the Government to do so. versus your debt commitments.

There is a certain consensus among different analysts that the agreement with the IMF is decisive for unleashing a good dynamic in financial assets in general and in debt in particular.

Juan Manuel Franco, an economist at Grupo SBS, considers it essential that the Government reaches an agreement with the IMF and hopes that it will be sealed during the first quarter of 2022.

“We consider positive the fact that the government finally sends the economic program, a necessary condition to start thinking about an agreement with the IMF. The agreement should be closed during the first quarter of 2022 due to the large maturities that must be paid the year. We also remain constructive that an agreement is finally reached based primarily on the fact that a non-agreement would exacerbate the current macroeconomic imbalances, “Franco said.

Paula Gndara, head portfolio manager at AdCap, believes that the Dollar bonds continue to be penalized in the absence of concrete progress with the IMF.

“Dollar sovereign bonds have lost 15% since the September primaries. News about the election result and comments on the potential deal with the IMF were not enough to boost the price of these assets. At this stage of events After the long and difficult debt restructuring, only strong advances will determine the improvement in the prices of these bonds, “he said.

Finally, Martn mansur, leader of the Private Banking Products area of ​​Banco Santander, affirms that, after the election, the market expects more concrete signals about the eventual agreement with the Fund.

“A credible path of stabilization of the macro variables could lead to a repricing of the sovereign curve in dollars. The potential of upside is big. However, investors still have many questions regarding the feasibility of this plan. In that sense, without major surprises on this side, sovereign bonds could continue trading at levels similar to those currently observed, “said Mansur.

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Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Phone : +1 281-333-2229

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