The punishment does not stop for Argentine bonds. While country risk continues to rise, debt securities fail to recover.
All sections of the Argentine curve open downward and accentuate the losses they have suffered in recent weeks.
The shortest part of the international law curve shows falls of 2.1% in both Global 2029 and Global 2030. In the middle section, the debt to 2035 and 2038 operates with a fall of 1.5% and 2 , 2% respectively.
Finally, in the longest tranche, debt fell 2.1% in Global 2041 and 1.6% in Global 2046.
The current weakness of bonds leaves fixed income operating with high yields that start at 22.9% in the short section and stand at 17% in the long section. In the case of local law debt, the bonds yield above 27%.
In this way, both the local law curve and international law show a negative slope and shifted upward, which shows the market’s distrust of the Government’s ability and willingness to pay.
In the last month, the bonds show drops of up to 7.3% and back 18% from the Monday after the STEP.
When it comes to local law bonds, the crash is even more significant. The AL29 shows a 4.7% drop, while in the medium and long tranches, the losses are 4.3% for the AL35 and 3.6% on average in the longer-maturity bonds.
Losses to current values generated a sharp rise in country risk. The index measured by JP Morgan climbed yesterday to 1809 points, thus reaching a new high since the debt swap carried out in September 2020.
With this advance, the country risk rises 67% from the debt swap, or 720 basis points.
Analysts at Delphos Investment said that dollar sovereign bonds continue to break through price floors and investor sentiment appears to be unchanged in the near term.
“Although a rebound in post-election parities was expected, a less bulky than expected result tempered optimism, which did not manage to stay beyond one wheel. After the elections, the driver and focus that guide Argentine assets be the economic performance and about this, there are no prospects for change either for now, “they said.
Currently, debt parities are at the beginning of 2021 lows, having gone from levels of 40% on average before PASO to current values of 33%.
The bonds have long ceased to operate by yields and operate by parity, that is, by their recovery value. Such low parity values imply that the market assigns risks of seeing a high growth event on Argentine debt.
Analysts from Portfolio Personal Inversiones (PPI) highlighted that although the electoral result increased optimism for 2023 and defined a new political map within Congress with 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 hehe cumulative probability of default remains above 82%. The bleeding spreads early this morning, “they said.
Argentine stocks on Wall Street operate in a mixed fashion. On the one hand, Vista Oil, Globant, Despegar, Telecom, Corporacin Amrica and MercadoLibre open lower, with falls of between 2.7% and 0.15%.
On the winning side, Ternium leads the hikes, with 3.8% advances, followed by Grupo Supervielle, Grupo Financiero Galicia and central Puerto, which rose between 3.1% and 2%
The key with the dynamics of bonds and stocks is an eventual agreement with the IMF. Although there are not many details that are known in this regard, the Minister of Economy Martn Guzmn confirmed that first the country will negotiate with the staffIt will seek to reach an agreement and then send it to Congress for ratification. Also, asked about the dates of the potential agreement, Guzmn assured that “we want to resolve it this year.”
For its part, it emerged that there are still differences between the economic team and the staff IMF technician, who It will aim for the primary deficit for 2022 to be 2.5% of GDP (compared to 3.3% established in the 2022 Budget by the Government).
Discussions between the parties will focus on a reduction in the exchange rate gap accompanied by a reserve accumulation program at a rate of at least US $ 5 billion per year.
Grupo SBS analysts highlighted that, “uncertainty regarding the deal prevails among investors, with Globals seeing declines in both stocks and bonds“.
Paula Gndara, AdCap’s head portfolio manager, stated that dollar bonds continue to be punished in the absence of concrete progress with the IMF.
“Dollar sovereign bonds lose 15% since the September primaries. The news about the election result and the comments about 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.
For his part, Martn Mansur, head 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.
Wall Street with weakness
The main indices on Wall Street are down. The Dow Jones fell 0.03% while the S & P500 and the Nasdaq fell 0.1% and 0.27% respectively.
Despite this correction, in the accumulated of the year, stocks in the United States rose more than 21% and are at all-time highs.
In the case of Europe, the stock markets also operate with a negative sign. The Stoxx600 falls 0.8%. All other stock markets are trading in the red, with Germany’s DAX 30 and Spain’s Ibex35 falling 0.7% each.
Yesterday the stock exchanges initially celebrated the nomination of the president of the United States, Joe Biden, for Jerome Powell to continue a second term as president of the Federal Reserve (Fed). But as the day went by, they lost momentum and closed with a negative trend.
In a statement, Powell thanked Biden for the appointment while confirming that “we will continue to use our tools to sustain the economy and the job market, and to prevent high inflation from taking hold.” Now, the Senate must ratify the appointment.
From Delphos Investment they explained that the nomination is seen by several analysts as a mark of a certain political autonomy from the Fed.
From the consultancy they highlighted that both rates and the dollar rose, expanding their trends in recent weeks.
“Rising rates and bonds strongly impacted on stocks in the technology sector, which in turn show some excessive behavior since the middle of last year. It is clearly the winning sector as a result of the Covid19 pandemic, but the high levels of valuation achieved and some signs of high speculation suggest caution in the medium term, “they said.