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Still Not Cheap

18 December 2019 by lberuti

At the end of October, Alberto Fernandez was elected President of Argentina. During his first month in office, Argentina’s debtholders have been embarked on a rollercoaster ride. The country’s risk premium first reached new high as the new administration was not supposed to adopt a market friendly stance, while roughly $11bln in dollar principal and interest coupons will become due to creditors before next summer. But things have improved a lot since early December. Argentina’s debtholders have organized themselves and discussions about debt restructuring have begun among themselves. Yesterday, a creditor group was officially set up ahead of talks with the country’s new government which are expected to get underway shortly. We also learnt than an emergency bill had been submitted to Congress, which allows the government to issue up to $4.6bln of notes to purchase hard currency from the Central Bank, which in turn would be used exclusively to repay FX debt. Investors saw a sign that Argentina would be willing to keep paying bondholders for some time and would possibly honour foreign currency debt payments until February. Argentina’s 5-year CDS closed 3pts upfront tighter. To insure $1 of debt over 5 years, it will now cost you $0.56 upfront and an annual cost of $0.05. Still not cheap though…