Argentine bonds caught in the crossfire

Investors are afraid of high-rate times across the world, because global economy is growing robustly. This situation has triggered sharp falls in all markets. It looks like a paradox, but this is how economy rules work. Yesterday, US 10-year rate was raised to 5.13 per cent, at the same time that New Zeeland and South Africa were increasing theirs. This move kindled fear and Wall Street collapsed. A few hours earlier, all European bourses had plunged. Argentine bonds in dollars were severely lashed: 2.50 per cent down. Ecuador (-2.02 per cent) and Venezuela (-1.77 per cent) followed them.

Argentine bonds were caught in the crossfire of US Treasury bond rate's hike, of peso-denominated BONAR's auction and of doubts about Argentine Statistics and Census Institute (INDEC, in its Spanish acronym).

Domestic papers had to endure severe pressure, losing more than 1 per cent. However, the most affected ones were dollar-denominated issues: different series of BONAR slid almost 2.50 per cent.

Bonds in dollars were severely lashed by such financial setbacks, since US Treasury 10-year bonds' rate climbed to 5.13 per cent, the highest value since last August. In order to keep on being more appealing than US bonds' rate, dollar-denominated bonds were forced to lower their price.

Moreover, market lacked money yesterday, since investors only offered more than ARG$5 billions in BONAR Arg's auction, where a 11.7 per cent annual rate was achieved. Bond trading in the Electronic Over-the-Counter Market (MAE, in its Spanish acronym) and Buenos Aires Stock Exchange plummeted to ARG$2.3 billions, 20 per cent less than the previous day.

Swap bonds continued on negative grounds. Peso-denominated Discount lost 0.90 per cent, closing at ARG$146.75. Some time ago, this price used to be the floor, but, with US Treasury bonds at 5.13 per cent, the minimum level may be somewhat lower. All the same, market won't lack opportunity hunters, since, at these prices, investors can enter and make great profits. Meanwhile, GDP coupon in pesos lost 1.5 per cent, though with poor trading because there are several sellers on falling grounds. This derivative has been the best investment of May and it has a good outlook. Moreover, it is not affected by INDEC, since it does not index by cost of living, rather by economy growth.

Post-default bonds in pesos declined in a slight and widespread manner: 0.40 per cent on average. This situation hints at position taking because investors believe the end of fall is close.

Meanwhile, dollar had a very special day. At 2 p.m., it reached to its highest price in Forex-MAE (main foreign exchange market): ARG$3.08. Then, sellers came up and the American currency closed at ARG$3.077.

Today's offer reaches to $200 millions, while bid only has $25 millions. On any other occasion, this would mean that dollar is about to fall sharply. However, that's not the case now, since requested prices hit ARG$3.078 for sale.

Argentine Central Bank (BCRA, in its Spanish acronym) intervened yesterday, though less strongly. The monetary authority bought around $40 millions, raising reserves to $41.14 billions. Market will have another hard day today. If current trend eases, prices may rally next week.