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Tuesday, March 21, 2023

Dollar bonds plummet and country risk jumps 8% in two days

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Thus, the country risk measured by JPMorgan climbed 4% to 2,117 basis points, the highest in almost three weeks. In just two days, he accumulates a jump of 8% after ending February at 1,960 points.

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“Dollar bonds are affected by the rise in the longest rate in the US. But they do not have a defined trend. They are lateralizing. Until the doubts about the supposed local debt swap that is coming are cleared up, it seems to me that they will continue like this without course”commented to Ambit Augusto Darget, President of Silver Cloud Advisors.

As this medium anticipated the week before, the Government seeks to reschedule debt maturities in pesos for the second quarter for 2024 and 2025. The talks began a couple of weeks ago and in the last hours some proposals were made known that could be in the table.

Within the framework of an agreement with the IMF in 2022the Government is also negotiating a reduction in the required volume of reserves from the Central Bank (BCRA), at a time when the drought in the countryside complicates the liquidation of dollars.

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“The relationship of investors with Argentina is rare. They do not understand why the country does not do what has to be done (…) When they see Argentina, they see it more as a sociological-political problem rather than I think the same thing: we have a political problem,” said Javier Timerman, a partner at Adcap Grupo Financiero.

Market agents added that it also works against the bad mood of the foreign bondholders who accepted the Argentine debt swaps, who They question certain new freedoms provided by the IMF towards Argentina and warn about the impact on the levels of country risk.

In an adverse context for Argentine finances, everything is further complicated by the projection of a new interest rate hike by the US Federal Reserve (Fed). “The concern about rising rates was revived, negatively impacting the Treasury bond yield curve, especially in the short tranche. In this way, the two-year rate rose to (…) the maximum value since 2007,” They argued from Cohen.

The yield on 10-year notes – the benchmark for global borrowing costs – broke above the 4% level on Thursdayreaching a new four-month high of 4.06%. The two-year bond, which better reflects short-term interest rate expectations, hit a new low.or maximum of 15 years, standing at 4.93%.

The rise in rates in the US comes after it became known that the US labor market showed better figures than expected. The number of Americans filing new claims for unemployment benefits fell again last week, according to a Labor Department report that pointed to sustained labor market strength, while another report showed that US labor costs rose faster than initially thought in the fourth quarter.

This revives fears that the US central bank will maintain its aggressive stance for longer.

“It doesn’t look like the labor market is responding to the rate hike. The unit labor cost is double expectations, because wages are going up and productivity is going down, so nothing really favors the markets.” said Jack Ablin, chief investment officer at Cresset Capital.

S&P Merval and ADRs on Wall Street

In the Buenos Aires stock market, the index S&P Merval it lost 1.4%, to 245,981 pointsin a round where the energy papers were in the crosshairs after a huge blackout that the country endured in the last hours.

In turn, the Argentine ADRs that operate on Wall Street operate with a majority of decreases, up to almost 6%, thanks to Cresud (-5.4%); Telecom (-4.9%); and Galicia Financial Group (-4.9%). While, Despegar (+1.5%), Mercado Libre (+1%) and Bioceres (+0.4%) advance.

After some mediocre results in February, the Wall Street indices started March with volatility.

After starting the day mostly down, the Dow Jones Industrial Average rose 0.9%, the S&P 500 added 0.5%, while eThe Nasdaq Composite was up 0.4%.

Salesforce soared 12.9% after the cloud-based software firm forecast first-quarter revenue above analyst estimates and doubled its share buyback to $20 billion.

In addition, Macy’s gained 9.6% after the department store operator forecast full-year profit above Wall Street estimates.

Instead, Tesla declined 7.8% after a four-hour presentation by its chief executive, Elon Musk, and his team failed to impress investors, with few details about their plan to introduce an affordable electric vehicle.

Source: Ambito

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