With a fiscal surplus we are very far from a restructuring, they have better return than stocksyou can recover the investment in less than 2 years.
Argentina continues to show an inverted bond curve, with the AL29 bond yielding 40%, the AL30 35% and the rest of the AL35, AE38 and AL41 bonds yielding around 20% annually.
When we look carefully at the issues between bonds with local and foreign jurisdiction, we find that the bond maturing in 2029 has a stock of US$ 4,831 million and the AL30 has a stock of US$ 29,673 million.
It is interesting to analyze that both titles pay a very low rate, in the case of the bond that matures in the year 2029 1% annually and the bond that matures in the year 2030 pays 0.75% annually until July 2027 and 1.75 % annual from that date to the end of the maturity.
These bonds pay very low rates, compared to a 7-year American Treasury bond rate of 4.14% annually. It does not seem advisable to restructure them; in any case, payments would have to be managed correctly, issuing new securities and meeting amortizations with new bonds.
The AL30 bond amortizes US$4 every US$100 in the year 2024 and US$16 every US$100 in the year 2025. In the case of the AL30 it amortizes US$20 every US$100 in the year 2025. This implies from now until the year 2025 the sum of US$ 6.9 billion in amortizations over two years, with maturities highly concentrated in the year 2025. If Argentina achieves a fiscal surplus, the money would be recovered in less than two years invested.
In the case of the AL35, AE38 and AL41 bonds, the capital maturities begin to operate in the year 2027 in the case of the bond that matures in the year 2038, in the year 2028 for the bond that matures in the year 2041, and in the year 2031 for the bond that matures in the year 2035.
Between these three bonds there are maturities of US$ 70,239 million, and their maturity begins in 2027, so there is time to raise this money, or to achieve the reputation to go out and renew debt in the capital market.
The interest rate they pay is less than 4.25% annually, they are long-term bonds and the 20-year American bond yields 4.4% annually, while the 10-year bond yields 4.12% annually. In this case it would not make sense to restructure the debt either, since the coupon rate is similar to the American rate, and any restructuring could lead to higher interest coupons.
Conclusions
The AL29 and AL30 bonds are at very low prices, trading around US$37.0, they are almost a stock in the capital market. They should be worth much more, since if Argentina achieves a fiscal surplus it should show a yield curve with a positive slope, so both securities should be worth at least US$55.
The rest of the bonds should copy the bullish path, but at a slower speed. It is time to buy short bonds, and as they reach the target of US$55.00, begin to arbitrage for long bonds that should be trading below this value.
Any government strategy of carrying out a mega issuance of bonds will threaten the rise of these securities, on the other hand, the release of bonds for the payment of amortization of these securities will increase the parities, and will lower the rates of return.
The path is to achieve fiscal balance in 2024, and a fiscal surplus in 2025, in this way the voluntary debt market would open for Argentina. We could not place it at rates as low as the debt restructuring of 2020, but it could be placed for longer terms, with rates slightly higher than those of the United States.
Currently, the total debt pays interest for the equivalent of 5.26% annually, and the debt represents almost 100% of GDP. The debt nominated in IMF Special Drawing Rights pays a rate of 6.72% per year, and is much higher than the rate we pay for restructured debt. These data are taken from the fiscal bulletin of the Ministry of Economy as of December 31, 2022.
If Argentina achieves a fiscal surplus, and manages to renew the public debt, postponing capital maturities and paying the interest rate, it will achieve a capital inflow that will end up ironing the dollar in the market, and will cease to be an object of desire.
If Argentina does not achieve a healthy budget surplus policy, the doors of hyperinflation and mega devaluation will be one step away. Achieving a surplus will be very difficult, even more so in a situation like the current one with a lack of dollars due to shortages in exports. What it costs is worth, sacrificing today, so that the incoming government has a good end to its 4-year mandate.
Financial analyst
Source: Ambito
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