The dollar-denominated GDP warrants that were part of Argentina’s $81 billion bond exchange are proving to be one of the emerging markets’ hottest securities. The warrants, which traded at between 5 cents and 5.5 cents when they were first detached from the exchanged bonds in November, have gone up more than 40% in just a few months. The stream of payments is now a $4.5 billion asset class and is actively traded.
The warrants, which came free with every new bond in the May 2005 exchange, have a rather complex structure. The general idea behind them was, however, simple: Argentina didn’t want to commit itself to a...
