Monday, 26 Oct 2020

UPDATE 1-Argentine new bonds fall sharply as investor jitters rise

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BUENOS AIRES, Sept 21 (Reuters) – Argentine newly issued international bonds are once more on the slide as investor investors price in rising risks over the country’s economic recovery and much-needed reforms following tightened capital controls last week.

The new bonds, issued at the start of the month after a largely successful $65 billion restructuring, have all dropped since, ranging between 35-45 cents on the dollar on Monday, with some of the Eurobonds falling sharply for the day.

Yields on the bonds have spread to around 13.5%, from around 11% when they were first issued, traders said.

The weakness underscores investor concern in the South American grains producer despite its revamping of foreign and local debts, with focus recently on moves to tighten currency controls and restrict already limited access to dollars.

The central bank limited personal and corporate access to foreign currency last week in a bid to stem a dangerous decline in reserves.

A J.P. Morgan risk index, which fell after the country restructured around $65 billion in bonds at the start of the month, also rose 88 basis points on Monday to 1,347. The Merval stock index declined.

“The market’s reaction to the new exchange rate measures implemented by the government have been clearly negative,” brokerage Portfolio Personal Inversiones said.

“Shortly after restructuring its debt, Argentina already shows a curve with a negative slope and the Merval has returned to the low levels it had reached at the start of the pandemic.”

Argentina’s economy is expected to contract over 12% this year due to the impact of the coronavirus pandemic, while analysts polled by Reuters predict a 20% slump in the second quarter of the year.

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