The 10 more profitable Argentine bonds

When markets have already accumulated handsome profits this year (up to 45 per cent) with a bond like Par in dollars, it is more difficult to find attractive alternatives. However, there are a number of options to take into account. Among them, we find debt papers issued by companies and some provincial or national bonds. On Tuesday, US 10-year rate retreated to only 4.50 per cent annual. The same low-yield phenomenon repeats in Europe and Japan. Rates may even be tripled with these 10 bonds, though higher risks are involved. What's more, if its value rises, profits will be greater. An aspect to take into account: papers issued by companies have less liquidity and, during uncertainty periods, their sale is more complicated. However, if the intention is to keep them until their maturity, these bonds become an alternative to bear in mind.

Papers issued by Argentine firms offer the possibility of obtaining a yield of up to 15 per cent in dollars; that's to say, more than tripling US 10-year bonds, which on Tuesday closed at 4.50 per cent annual, and almost doubling foreign-currency bonds issued by Argentina.

Investors turned increasingly to this type of alternatives, after debt restructurings carried out by companies and banks before the one made by government itself. Negotiable Obligations (that's the way issues made by companies and banks are called) have also increased considerably during the last months, accompanying Argentine public bond quotes and curb to US rate rise by Ben Bernanke.

However, despite these increases, there are still interesting yields from companies, which have normalized their situation and are paying on a normal basis. Of course that there are corporate bonds which have never been declared in suspension of payment. In these cases, yields for the investor are significantly lower than those offered by Argentine bonds. Antonio Cejuela, Research chief of Puente Hermanos, explains that "many investors opt for incorporating negotiable obligations in their portfolios, since risk can be diversified in this way. For example, if a percentage is placed in bonds in Argentine pesos adjustable by government CER (Benchmark Stabilization Coefficient), it makes sense buying corporate bonds to incorporate an amount in dollars."

Another advantage is that maturities are much closer with respect to what bonds in dollars issued by Argentine State offer, like Par and Discount, which fall due in 2038 and 2033 respectively. Negotiable obligations expire during a term ranging between two and five years, on average, which also offers the possibility of fencing risk.

Although bonds have liquidity (they quote daily in the Electronic Over-the-Counter Market), the problem is the necessary amount to get in. In general, they do not fall from the $30,000 per kind, since holders are institutional investors, not willing to buy or sell for a lower amount.

Outlook

An outlook of what may be obtained through Negotiable Obligations and comparison to public bonds' yield is provided below:

Corporate bonds not falling into default: the list includes, among others, the oil firm YPF, the telecommunication group Telefónica de Argentina and the energy company Petrobras Energía (former Pérez Companc).

Due to excellent performance during crisis (avoiding default), these bonds produce 7 per cent annual in dollars on average. Although rate is low, it is still much more appealing than a US bond's and with a truly-fenced risk. Moreover, maturities do not exceed 2012.

Bonds from corporations which have restructured debt: it includes public services groups (Transener, Telecom, MetroGas, TGS and Autopista del Sol, for example), banks (Hipotecario, Galicia), and industrial companies like Mastellone or IMPSA. All available bonds arose from restructurings. They have already had significant rebounds. Therefore, the yield has fallen. However, there are still good alternatives. Autopista del Sol produces almost 15 per cent in dollars, Banco Hipotecario more than 9 per cent, like Galicia. Telecom bears bonds which produce more than 10 per cent. Of course that buying these papers entails trusting economy will keep on growing, without forcing this type of firms to fall once again in suspension of payments.

Public papers in dollars: with rise posted during the last weeks, the yield slid, though they still look attractive. Those falling due in 2012 or 2013 (medium term) have rates around 8 per cent annual and for longer terms, they reach to 8.80 per cent, almost doubling a US bond.

Bonds in Argentine pesos: only a few companies issue in domestic currency. Last week, Tarjeta Naranja issued an international paper at a 15.5-per cent fixed rate in Argentine pesos at 4 years. It was completely subscribed in foreign lands (ARG$308 millions) and the bet, in this case, is that dollar would remain relatively stable in the following years for rate in domestic currency to offset potential nominal depreciation that Argentine peso may suffer against dollar.