“This time, the immediate problem is in the peso bond market, where creditors have become reluctant to renew maturing government bonds. With spending still high and the government of Alberto Fernández under pressure from the IMF to stop taking cheap loans from the central bank to cover its budget deficit, the feeling is growing in Buenos Aires that officials are running out of financing options and that a restructuring of local bonds is becoming almost inevitable.
And he adds: “Part of the problem lies in the fact that the value of a large part of the bonds are linked to inflation, being the only instrument that investors affected by the crisis have found attractive. Thus, the explosion of inflation, Instead of providing a large dose of debt relief, as has happened to governments around the world this year, it is actually putting even more strain on fiscal coffers.Consumer prices have soared at an annual rate of more than 60% this year, the highest this century and one of the highest in the world.”
Bloomberg highlights the increase in Dollars both in the official market -retail and financial- and with the blue dollar.
“All of this is also drawing the attention of Argentina’s foreign bondholders. The government doesn’t have to make significant payments on those bonds for years, but investors are still getting nervous, driving down the price of benchmark securities.” only 23 cents on the dollar,” says the outlet.
“The path for Argentina to build up enough international reserves to make principal payments on its foreign debt in the coming years looks increasingly narrow,” said Jared Lou, a portfolio manager at William Blair Investment Management in New York. last time it was flawed in that it offered debt relief and low coupons without any reform, and this is where we are today.”
Despite these projections, the Minister of Economy, Martín Guzmán, affirmed this week that the debt in pesos is sustainable and that the Government will never stop paying.
However, it may not be enough to stave off a debt crisis ahead of the October 2023 presidential election as investors demand assets with ever shorter maturities, according to Ramiro Blázquez, chief strategist at brokerage BancTrust & Co. in Buenos Aires.
“The increasingly shorter maturities could generate a debt crisis before the elections,” said Blázquez. “To avoid that scenario, the government is likely to resort to a combination of pressure and modest rate increases to ensure decent reinvestment rates. But success is by no means guaranteed.”
Tuesday’s sale will consist mostly of discounted, inflation-linked Treasuries maturing at the end of this year. Argentina is also selling dollar-linked bonds due in 2023 and 2024.
“As long as prices are reasonable and the Treasury issues short-terms as well, most of what remains to be renewed will be renewed,” said Carolina Gialdi, head of sales and trading for international markets at Max Capital in Buenos Aires. “But there is a preference for higher liquidity; they may not reach 100%.”
Source: Ambito
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