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Did They Top The Market?

06 July 2017 by lberuti

In June this year, Argentina became the third Latin American issuer to sell century bonds. Mexico was the first in 2010, followed by Petrobras – the first non-investment grade issuer – in 2015. Since his election in December 2015, President Macri had been a darling of emerging-market investors, promising to ignite the economy, tame inflation and roll back regulations that impeded businesses. It culminated 3 weeks ago, on June 19th, with the sale of $2.75Bln of bonds maturing in 2117. The next day, MSCI surprised analysts when they announced they would not raise Argentina to emerging-market status because they were not convinced that economic changes under Macri were irreversible. Instead, they left it at the “frontier” level with the likes of Mauritius, Sri Lanka and Kazakhstan. Since then, Argentina has been one of the worst performers in emerging markets and the volatility of the peso led even forced Pampa Energia – one of Argentina’s biggest energy companies - to scrap an overseas bond sale last week. To make matters worse, Cristina Fernandez de Kirchner, the former president who is deeply unpopular with investors, could make a political comeback as she runs for a seat in the senate. After touching a low of 315bps in June, the 5-year risk premium of Argentina is on the rise again. It closed tonight at 349bps, 17bps wider on the day.