Argentina will buy back overseas bonds
2023.01.18 12:41
Argentina will buy back overseas bonds
By Ray Johnson
Budrigannews.com – Economy minister Sergio Massa said on Wednesday that Argentina will buy back overseas bonds worth more than $1 billion to improve the South American nation’s debt profile. He wanted to send a positive message to the markets despite the fact that the country has low reserves.
The minister added that the move will focus on sovereign notes due in 2029 and 2030. The program is set to begin immediately as the nation looks to take advantage of a “window of opportunity” after a debt risk index fell recently.
Argentina is battling to replenish foreign currency reserves, control rampant inflation, and support a weakening local peso currency. Massa said the unusual move could help the country gain access to capital markets.
Massa stated, “This is a first step,” and added that the government was targeting short-maturity bonds following a drop of over 1,000 basis points in a country risk index that is closely watched since its peak in the middle of last year.
A trader told Reuters that the 2030 bond rose 7.1% to 35.69 cents on the dollar at 11:15 am local time.
“We will carry out other measures like the one we are taking today,” he added, “undoubtedly over the next few months, by inviting the private sector to accompany the Argentine state in this job of improving its (debt) profile.”
Despite major debt restructurings in 2020 with private creditors and a $44 billion re-profiling on a failed program with the International Monetary Fund (IMF), Argentina’s sovereign bonds remain in distressed territory.
A request for clarification regarding the country’s debt buyback announcement was unanswered by an IMF spokesperson.
According to Walter Stoepplewerth, chief strategist at Gletir Corredor de Bolsa, one of the objectives of the move was to close a significant gap between the official peso-to-dollar exchange rate and popular parallel currency markets, where dollars cost twice as much.
He stated, “We believe that providing some calm to the parallel dollars is the real goal of this program,” but warned that low reserve levels made it difficult. Net levels are thought to be much lower than the estimated $43 billion in gross reserves.
“The real question here is about how much firepower Massa’s team has. This first phase program accounts for 16.44% of this scarce stock, as net reserves hover around $6.08 billion.
