Argentina to buy back US$1 billion of sovereign bond debt

Economy Minister Sergio Massa announced the decision today, which aims to improve bond prices, reduce country risk and curb runaway parallel dollar rates.

Economy Minister Sergio Massa announced today that Argentina will start a process of “rebuying Argentine foreing debt for over US$1 billion”.

The decision “is a first step” focusing on “short-maturity global bonds”, he said. The buyback will focus on global bonds that mature in 2029 and 2030 (AL29, AL30, GD29 and GD30). “We understand that this is where we should attack in order to improve Argentina’s debt administration, debt profile and maturity profile.”

Massa said the measure will contribute to lowering the nation’s country risk. Compiled by JP Morgan, the country risk index is designed to reflect the level of risk associated with investing in or lending to a country, and higher ratings make it more expensive for nations to borrow. Yesterday, Argentina’s country risk closed at 1,881 points. In July, it peaked at 2,913 after Martín Guzmán’s untimely resignation as Economy Minister.

“We saw a drop of 1,000 points or a little more of the Argentina country risk index. That means a window of opportunity for Argentina,” added Massa. “This improves the potential for Argentine companies and the Argentine state to access capital markets.”

The debt buyback was made possible in part because Argentina has begun to accrue international reserves, Massa said. He attributed this to “export promotion measures, and also record-high levels of exports in the automotive and the agricultural sectors” as well as the activation of the one billion-dollar China currency swap.

The decision was made amid a surge in the MEP dollar, which has risen by 20 pesos in the last month. To further counteract the increase, the Central Bank raised the interest rate by 200 basic points, putting it at 72% for one-day reverse swap rates, and at 95% for one-day asset operations.

According to official sources, after the combination of both measures, Argentine bond prices should rise by more in US dollars than in pesos, since it’s now “more tempting to stay in pesos than fleeing to the MEP”.


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