GDP coupon life and soul of market

GDP is once again the best investment of the month. This paper pays its holders depending on Argentine economy growth. Energy woes arising this week did not manage to affect its development, since, for the time being, there are no signs showing that this crisis may have a strong impact on the economic activity. Everybody bets that this year Argentina will grow 7.5 per cent and probably 6 per cent in 2008. For that reason, GDP coupon keeps on leading investors' ranking of preferences. Will it continue rising? Paradoxically, Argentine outlook is more uncertain than the international context. All the same, holders are not willing to get rid of a paper which has pleased them greatly so far: it settled at more than $15 yesterday, starting at $3 when debt was restructured.

GDP coupons in Argentine pesos and in dollars have been the best investment of May, followed by stocks. All these assets have produced more than 4 per cent, in a month when bonds did not shine due to meddling of price indexes by Argentine Statistics and Census Institute (INDEC, in its Spanish acronym).

Investors won't have fond memories of May, since only few assets have offered pleasing rates, although some stocks do hold dazzling yields, like Aluar and Molinos, which have touched around 30 per cent. All the same, they have only been exceptions in a really low market.

Apart from these specific assets, BOCON PRE8 stood out, with 1.69 per cent, followed by BODEN 2008, with 0.95 per cent. These bonds show the best performance because they are the shortest and safest ones, during a period when investors distrust government for having rigged cost-of-living indexes, data by which peso-denominated papers adjust.

Distrust has spread to all bonds, which have had another gloomy month. They have no light of their own and they only rise when good foreign news arrive.

Time deposits, currently producing negative rates with respect to inflation, are interspersed throughout bond ranking, since it pays around 0.57 per cent on a monthly basis. With current inflation, profits can only be made if a minimum 1-per cent rate is obtained, and only four assets have managed to do so: coupons (in pesos and in dollars), stocks and BOCON PRE8. This is too poor for a high-risk market as Argentina's.

The longest bonds have been severely hit by INDEC. Discount in Argentine pesos from debt swap, which, till February, shined as the bond with the best performance, has lost 0.06 per cent.

BONAR X in dollars has plunged 1.73 per cent, while Par in dollars was forced to endure a sharper decline of 3.80 per cent.

Dollar has also plummeted, despite efforts made by Argentine Central Bank, which has tried to hold it with strong purchases. Wholesale dollar was worth ARG$3.095 at the beginning of the month, closing yesterday 0.50 per cent down at ARG$3.078. In exchange agencies, the American currency has slid from ARG$3.11 to ARG$3.10, which represents a 0.32-per cent drop.