22 de junio 2007 - 00:00

Argentine bonds on the wrong side of the road

Argentine bonds were not lucky yesterday, since US Treasury 10-year bond rate zoomed to 5.19 per cent, staying there for almost the entire session. By the end of the day, it slid to 5.16 per cent, but it was too late for markets to rebound.

North American bonds' rate leaped when a sounder-than-expected piece of information about industrial activity in US north-eastern coast was revealed.

Philadelphia Fed's index on business conditions climbed to 18 units in June, quite above market expectations betting on 7 units. This index hit 4.2 in May.

This industry strength rules out the possibility that the Federal Reserve may lower short-term interest rates this year; reason why Treasury bond rate rose.

Argentine debt bondholders were affected by this piece of news, despite they had read a report before showing that foreign investors believed that the second half of the year would be really positive for emerging markets' papers, including Argentina's.

Swap bonds were severely lashed, particularly peso-denominated Par, which lost 3.10 per cent. It's been a long time since investors took this bond into account. We should keep in mind that it's highly volatile: it falls as sharply as it rises. This is a bond to speculate. Peso-denominated Discount slumped 0.97 per cent. This paper, like all the others in pesos, has weakened due to lack of confidence in Argentine Statistics and Census Institute (INDEC, in its Spanish acronym).

GDP coupons showed the best performance, by rising 0.40 per cent, given favourable economy growth data.

Post-default bonds in pesos alternated between drops and hikes. BODEN 2014 climbed 0.40 per cent
and BOCON PRE9, 0.20 per cent. The remaining papers collapsed 0.20 per cent on average.

The worst performance was observed in dollar-denominated bonds. BODEN 2013, with poor trading, lost 0.80 per cent and BONAR X, 0.85 per cent.

Trading amount fell sharply, since between the Electronic Over-the-Counter Market (MAE, in its Spanish acronym) and Buenos Aires Stock Exchange, only ARG$1.6 billion was traded, a bit more than the amount posted on Tuesday. Several players were absent because they found market undecipherable. North American rate volatility throws them off the trail.

Dollar continued stable, though this time thanks to Argentine Central Bank only, which acted as if it had heard Argentine President Néstor Kirchner's statements about high dollar.

The monetary authority bought around $100 millions, raising dollar price to ARG$3.081 in Forex-MAE (main wholesale market). In exchange agencies, the American currency continued at ARG$3.10 for sale.

Dollar is really firm for today, since buyers keep on standing out. After close, sale orders for only $20 millions came in, not enough to satisfy buyers asking $55 millions.

All the same, exchange rate information is secondary. What really matters today is US Treasury bond rate level. Argentine papers are subjected to such piece of information and to INDEC effect.

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