14 de abril 2008 - 00:00

Isn't it high time savers placed in bonds? Yields at 20% in pesos

Continuous manipulation of INDEC data tired out foreign investors. Bonds have fallen so much in the last two trading days that they were left with unprecedented yields. Instruments denominated in pesos already offer 20 per cent annual (equivalent to 15 per cent in dollars buying an exchange insurance). This is not an inconsiderable figure amid no alternatives in market. There are doubts about Argentina's financial capacity without international credit. Yet, government still has some leeway to channel the situation.

Bonds in pesos - How much do they yield?
Bonds in pesos - How much do they yield?
Prices of Argentine bonds are so low that they are included among the ones having the highest yields of the world. This situation shows that risk has increased, which, in turn, explains why, despite allowing 12-per cent yields in dollars, they are not requested and they move in an increasingly smaller local market.

If we take into account country-risk since Argentine Statistics and Census Institute (INDEC, in its Spanish acronym) started to falsify inflation (when settling around 200 points) to the present, we see it grew 170 per cent. The 558 points included in Friday's JP Morgan EMBI show the gap with US Treasury bonds. If these indicators are grounded, taking into account US Treasury 10-year bonds' yield at 3.50 per cent, Argentina should pay a 9-per cent rate in dollars to take credit.

However, reality does not coincide with theory. Argentine bonds' yields in dollars are above 10 per cent in dollars. A more natural measurement.

If taking a bond from each group, we will see that they are above 11 per cent. BONAR X in dollars, one of the last instruments government put in tender, yields 11.76 per cent. Among swap bonds, Par denominated in dollars, Argentine law, hits 11.14 per cent and, among post-default ones, BODEN 2013 offers 11.37 per cent. This bond is a great opportunity since it has an average duration of 2.2 years, but, as market suspects the shortest bonds will be swapped, nobody wants them.

Peso-denominated bonds are even more appealing in terms of yield. BODEN PRE13 (little market due to limited issue) yields 11.92 per cent out of inflation. If we take into account that 2008 cost of living may reach to 9.5 per cent measured by INDEC, its rate is nearly 21 per cent and, if discounting cost of exchange insurance, profits may touch 17 per cent in dollars.

But, if some saver does not want to head for a so limited market bond, BOGAR 2018 is another option. Before INDEC, this instrument yielded 6 per cent out of inflation. Now, its rate hits 9.77 per cent, which means that it may settle at 19.2 per cent and its yield is equivalent to 15 per cent in dollars.

The yield is estimated on the basis of capital growth due to cost of living rise, plus interests, compared to price paid when buying the bond. BOGAR pays 2 per cent annual out of CER.

Another bond with appealing rate is Discount in pesos, which, with a 9.51-per cent yield out of CER, offers the possibility of earning 15 per cent in dollars. This is an instrument with a really long term and, despite its appeal, it's rejected by investors. Current price comes closer to the lowest levels of history and it's only 3 per cent above price with which it made its debut in market back in April 2005.

If Argentina had the country-risk it used to have before INDEC rigging, the nation would get credit at 6.5 per cent annual. It has already paid 12 per cent to Venezuela.

Argentina is going to lose for this risk difference more than what's saved by altering inflation: not only will it lose by paying 5 points more out of new debt (equivalent to an increase of $500 millions for 2009), but also by paying other $700 millions for GDP coupon, when estimating an economy growth deflated by an index lower than reality.

Dejá tu comentario