So far this year, a few provinces have already made debt placements US$5.6 billion. Contrary to the dynamics of sovereign bonds in dollarsinvestors see potential in provincial securities hard dollar.
In this context, one of the most attractive bonuses is the Cordoba 2025which pays 20% of capital every six months, which makes it a very difficult alternative to improve, in addition to yielding close to 30% in one of the provinces with the best fiscal dynamics in recent years.
Likewise, for investors with a less risky profilethere are the bonds guaranteed by royalties of the province of Neuquén and that of the City of Buenos Airesboth titles yield close to 10%.
Risk appetite: attraction to provincial debt
Dimitry Grikoinvestment director of Arkaim Advisorsis strategically positioning the fund in bonds of certain Argentine provinces that, regardless of the result of the election between Sergio Massa and Javier Mileibecome attractive to investors.
According to Griko, provinces such as Córdoba and Entre Ríos enjoy good financial health, which makes them resistant to high inflation and generates higher tax revenues. Despite the usual concerns about risk, Arkaim’s fund maintains significant exposure to national debt, representing more than 10% of its assets. This allocation is a source of solid performance, outperforming 99% of its peers over the past five years, generating a return of 7.2%, in contrast to an average decline of 1.1% among its competitors.
The provincial bonds of Entre Ríos and Córdoba are experiencing a notable increase in value in the market, resulting in solid returns. These provinces stand out for their fiscal surpluses, reasonable debt loads and solid reserves, making them very attractive to investors, even in the worst case scenario, a creditor-friendly reprofile.
For many on Wall Street, Argentine provincial bonds offer a way to diversify and avoid direct exposure to the country’s sovereign risk. In comparison, the Argentine 2030 bond is trading at around 28 cents on the dollar, reflecting investor concerns about a possible tenth sovereign default.
Despite the recent turbulence in the Argentine political landscape, Arkaim’s strategy appears to remain solid. Investors are closely watching political developments as the second round of elections approaches, and Argentine bonds remain an attractive investment amid the uncertainty. The stability of the peso in parallel markets and the prospects for a delayed devaluation of the official exchange rate are also being closely monitored.
Source: Ambito
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