Global markets reacted strongly yesterday, after new data showing a healthy US economy with a moderate inflation risk were disclosed. US 10-year rate, which had risen to 5.30 per cent, has finally settled at 5.20 per cent, relieving investors. As a consequence, all bourses have climbed as well as bonds, both in developed and emerging markets. There's still great liquidity across the world and profit takings are too short: nobody wants to stay out of a hiking cycle that may continue. Argentina keeps on being the exception: peso-denominated bonds, which have fallen more than 6 per cent in the month, could not manage to rebound, though due to inflation data manipulation. The negative consequence of this is that country-risk has increased 70 per cent since the beginning of 2007, to 326 points. Such situation does not have a direct impact on economy, but it does affect financing cost for the State and companies.
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Global markets' reaction did not spread to Argentina in full due to clash in Argentine Statistics and Census Institute (INDEC, in its Spanish acronym). While bourses and international bonds responded strongly to US rate drop, domestic papers closed with a predominant falling trend.
Market was divided between optimistic investors, who bought papers from the first hour, and conservative investors, who did not hesitate to sell in view of slight price rally. At 1 p.m., market lost volume because great investors disappeared, going on automatic pilot till 6 p.m., when the Electronic Over-the-Counter Market (MAE, in its Spanish acronym) stops trading. Bonds have ended with a selling trend for today, as opposed to what has happened with the other emerging markets. A more-than-ARG$3-billion trading (one of the highest of the year) was observed because great investors decided to arrange their portfolios starting at low prices. No resistance was put up to such strong demand: sellers were always present, preventing prices from rebounding.
Although foreign news have brought great relief, clash in INDEC is working against bonds, taking country-risk to the highest level of the year: 306 points. At the end of January, before intervention of INDEC, Argentine country-risk hit 180 points. The difference between both indicators is the higher rate now Argentina has to pay to get into debt. In a few months, country-risk has increased 70 per cent.
When US Treasury bonds' rate slid to 5.20 per cent from 5.30 per cent, peso-denominated Discount (main debt swap paper) climbed 0.14 per cent, while par in the same currency plunged 0.20 per cent. GDP coupon remained unchanged.
Among peso-denominated post-default bonds, the only one rising was BOCON PRO12 (+0.45 per cent), while BONAR (-0.13 per cent), BODEN 2008 (-0.13 per cent) and BODEN 2014 (-0.50 per cent) slumped. This decline also reached Argentine papers in dollars, which are not appealing and have poor trading.
The American currency remained unchanged. Argentine Central Bank (BCRA, in its Spanish acronym) bought around $40 millions, raising reserves to $41.73 billions. In Forex-MAE, dollar closed at ARG$3.074 and, in exchange agencies, it continued at ARG$3.09 for sale. Trading summed $421 millions in Forex-MAE, to which we should add more than $150 millions from MEC (money changers' market). Dollar is highly seller for today. There are $80 millions in offer against $30 millions in bid.
All hopes are pinned on tomorrow's session, when May US inflation will be revealed. Positive data may trigger euphoria. Local traders wonder whether such enthusiasm will reach Argentina, where the main concern of the Economy Ministry is to change the way in which inflation is measured.
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