7 de junio 2007 - 00:00

Argentina after ARG$1.5 BL at 12%

Despite this is not the best moment of markets, Argentine Economy Ministry will place today the first issue of peso-denominated bonds at fixed rate for a five-year term. Given expected great demand, the aim is to achieve a rate slightly below 12 per cent annual.

The amount to be placed ranges between ARG$750 millions and ARG$1.5 billion, out of a total program of ARG$4.5 billions. Final figure will be decided depending on rates offered by participants. However, there's every indication that Economy Ministry has prepared a good buffer so as to reduce the amount to be placed if yields asked by banks and funds are excessive. "Not only has May's 0.4-per cent inflation been received in negative manner here, but also in foreign lands, which will affect this placement. If it hadn't been for this piece of information, investors' interest would have been greater."

Although issue of the new BONAR Arg will be made tomorrow, those subscribing it will have to place funds on June 12. This paper will have a 10.50-per cent annual coupon paid every six months.

Retreat

Rate hike observed during the last days in main global markets, plus unease about data manipulation by Argentine Statistics and Census Institute (INDEC, in its Spanish acronym), have caused public papers to retreat during the last days. The most affected ones were those denominated in pesos adjusting by inflation, like Discount, which has plunged more than 3 per cent in the last two days.

This transaction is clearly aimed at institutional investors, since minimum bid to participate is ARG$150,000. It's also expected that most bidders will be foreign entities. This is because they can bring resources into the country without having to face the 30-per cent one-year cash minimum.

Although rate of this placement is higher than the one obtained from dollar-denominated issues (the State has paid 8.44 per cent annual in the last issue), what's appealing is that it's easier to get into debt in domestic currency. Just by the impact inflation has on collection, it's easier for government to guarantee itself resources.

Foreign investors are confident that exchange rate will stay relatively stable, thus peso-denominated yield will repeat in dollars. With a lower-than-5-per cent annual rate in dollars for US Treasury bonds, the prospect of earning around 12 per cent annual is a good incentive.

Argentine government follows the path already walked by companies and banks. The most recent case is placement of the banking entity Banco Macro, which has obtained a 10.75-per cent annual rate for a five-year peso-denominated bond. The only difference is that such bond has been placed in international market under New York rules, always entailing extra appeal.

For its part, the bank Banco Río has placed another paper in domestic market in pesos at fixed rate. With a three-year term, it paid slightly below 11.50 per cent annual. Mortgage Bank has also launched a paper in domestic currency this week, which pays peso-denominated interest rate. The special feature of this placement is that subscription is done in dollars.

During a meeting with financiers, Argentine Economy Minister Felisa Miceli has asked more "long-term loans denominated in pesos and at fixed rate" to finance long-term investment. With these issues in Argentine pesos at fixed rate, the above-mentioned entities get a more appropriate funding to lend in the long term, without falling into the usual monetary and rate "gaps".

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