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Peso-denominated bond launched despite drop
Total bids between the competitive and non competitive tranche reached to ARG$5.26 billions. In sum, 230 bids were made altogether (only 11 went to the non competitive tranche) and most of them came from foreign entities.
"The result of this auction shows that INDEC's inflation data hasn't affected market," Argentine Economy Minister Felisa Miceli signalled, who admitted that "it won't be easy to improve the rate in the following issue." Treasury Palace has approved a ARG$4.5-billion program for the new five-year bond.
Attraction
Foreign investors are attracted by peso-denominated bonds because of their high interest rate. If dollar continues stable with respect to peso for a long time, 11.70 per cent in domestic currency becomes a similar yield in dollars. Compared to the 5 per cent annual offered by Treasury bonds, this is a highly appealing rate. This shows that market is not expecting a significant peso devaluation (if that were the case, the new bond would be bad business).
Moreover, Argentine Economy Minister Felisa Miceli has signalled that at least a portion of amount obtained with this issue will be allocated to debt maturities in domestic currency. All the same, the most important obligation of Treasury will come at the beginning of August, when almost $3 billions fall due for BODEN 2012 capital amortization.
Issues
A group of domestic entities is taking advantage of appetite for peso-denominated fixed-rate bonds. The bank Macro has issued $100 millions at 10.75 per cent in international market; Banco Río has made a three-year placement in domestic market (its rate reached to 11.3 per cent) and two other entities, Mortgage Bank and Comafi, have started seeking funding through a fixed-rate peso-denominated paper.
For banks, this entails obtaining long-term peso-denominated funding, having greater leeway to lend in market at fixed rate and in domestic currency. For government, this is a key piece of information, allowing a wider financing margin for investment.
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