Julius Baer highlights new source of financing for Argentinian government

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Alejandro Hardziej, fixed income analyst at Julius Baer, has commented the forthcoming Argentina’s local-currency bond issuance.

Hardziej observed that the country has issued around $19bn in hard-currency debt since the start of the year but has not tapped yet into the local-currency bond market.

“With interest rates at 28.75%, the Finance Ministry believes compensation should be sufficient to attract investors and plans on auctioning bonds next Thursday, in Argentine pesos and with maturity in 2018,” the analyst explained.

Hardziej believes that in the event of a success, the deal could open up another source of funding for the Argentinian government, “potentially reducing reliance on dollar debt and the risks that come with it over the long term.”

Julius Baer’s analyst underlined that “the country is still in a phase of transition, with many economic adjustments still taking place and the positive results yet to be seen.”

“Inflation is very high (47%) and the economy is still contracting (-0.7% q/q in Q1 2016). However, we remain constructive on Argentina as pressure on consumer prices should come down rapidly this semester, growth should return to positive territory in 2017 and we expect the government to continue taking steps to restore investor confidence and strengthen public finances,” he concluded.

Last February, Argentinian president Mauricio Macri has stricken a $4.65bn (€4.27bn) cash agreement with a number of US creditors, ending a 15-year dispute regarding Argentina’s default on its $82bn (€75.4bn) foreign debt in 2001.