7 de junio 2007 - 00:00

Bonds down 4% in two days

Argentine investors were not expecting that Argentine Statistics and Census Institute (INDEC, in its Spanish acronym) was going to rig data in such a way. The entity has eliminated one percentage point minimum from the 0.4-per cent retail inflation. Yesterday, CER-adjusted papers fell another 2 per cent. Price rigging will continue till October presidential elections and only then will measurements be open. With current stable dollar, indexed papers are attractive for investors, but we should take into account that, till October, we will be in the hands of an INDEC showing First World inflation.

"All players were sellers," a trader stated at the end of the day when bonds closed with higher-than-1-per cent drops and high trading: between the Electronic Over-the-Counter Market (MAE, in its Spanish acronym) and Buenos Aires Stock Exchange, more than ARG$2.7 billions were traded.

Debt swap bonds were lashed by investors' discouragement. Peso-denominated Discount and Par closed 1.20 per cent down. GDP coupon endured quite well hardship, since it only lost 0.75 per cent, though with poor trading (a good piece of news, since its shows that holders are not rushing to sell them). This paper is not linked to cost of living, rather to economy growth. For that reason, it's on the fringes of INDEC manoeuvres.

Government couldn't have announced May's 0.4-per cent inflation in a worst moment, since it coincided with a shaken international context. US Treasury 10-year bonds' rate settles at 4.96 per cent (touching 5 per cent on the previous day). "A North American Treasury bond yielding 5 per cent annual is like a dollar vacuum cleaner, since it's the safest paper of the world offering handsome profits. It's natural to see investors selling emerging countries' stocks and bonds to take shelter there," a trader signalled.

Not only were Argentine papers affected because US papers' rate has improved, but also because their yields have fallen for being indexed by a lower-than-real inflation. "Bonds should be based today on a higher-than-15-per cent annual inflation, thus offering around 20-per cent annual profits. However, government wants to impose a lower-than-10-per cent inflation, altering the rules of the game," a market analyst explained.

Among post-default bonds, where changes are slighter because they are shorter than swap's, BOGAR 2018 drop stood out, which slid 1.21 per cent. But, as foreign investors are highly interested in this paper, purchase orders from European banks were observed near the end. They know that bad mood for INDEC only lasts a few days and then market will realize that Argentine bonds' yields keep on being really high. "When US bonds' rate lowers, values of emerging countries' papers will improve," a traded said.


Country risk

All emerging countries' bonds have plummeted because US rate settles at the highest level since July 2006. For that reason, average country-risk of the region has risen four points to 156, according to emerging markets' index JP Morgan's EMBI+.

The remaining Argentine post-default bonds have plunged between 0.50 per cent and 0.70 per cent. BODEN 2014 was severely ill-treated by investors, which slumped 2 per cent.

Post-default bonds in dollars also had to pay the cost of distrust and crumbled, though with poor trading. BODEN 2013 lost 0.67 per cent and BODEN 2012, 0.24 per cent.

On top of all this, dollar declined slightly in wholesale market. In Forex-MAE, the American currency closed at ARG$3.077, two hundredths less than the previous day.

Argentine Central Bank bought less dollars than on previous days: around $40 millions. All the same, reserves climbed $80 millions thanks to euro hike against dollar. Now, they settle at $41.08 billions.

The American currency ended with a high selling trend for today, since there are $70 millions in offer against $20 billions in bid.

Futures dollar has zoomed in almost all positions. For the end of the month, it quoted at ARG$3.0753 (+0.04 per cent) and for the end of the year, it's worth ARG$3.0967 (+0.09 per cent).

Bonds have been trapped inside the worst of worlds: INDEC indexes and hike of US bonds' rate. However, foreign investors' mood is also volatile: they will soon love risk again and they will return. This is what has happened lately.

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