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Capital Markets

Optimism about Argentina bubbling over

High-yield sovereign issuer sells a $2.75 billion century bond; bank valuations ‘hyped’ but room still seen to grow.

The Republic of Argentina, which is rated B3 by Moody’s and B by Standard & Poor’s, sold a $2.75 billion 100-year bond to international investors on Monday to confirm that appetite for Argentine investments remains remarkably strong.

Despite the fact that Argentina has defaulted three times in the past 23 years, the bookrunners, Citi and HSBC, built up nearly $10 billion of orders, although investors say there was some padding of the book. The bonds priced with a coupon of 7.125% to yield 7.917%.

Argentina’s finance minister Luis Caputo says the deal was possible because of “the world’s credibility and its confidence in Argentina and the future of our economy”.

The deal certainly makes a statement, but perhaps it is more about the frothy nature of emerging market (EM) debt as investors remain starved for yield in developed markets – especially as Argentina’s president Mauricio Macri’s reform programme faces a serious test in the country’s mid-term elections in October.

Katia_Bouazza-160x186

Katia Bouazza,
HSBC

Asked whether the weight of the bond’s statement was about Argentina or the wider market, Katia Bouazza, head of global banking Latin America for HSBC in New York, says: “I think it’s both.

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