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Argentina raises eyebrows with surprise 100-year bond sale


Reuters

UPDATE 3-Argentina raises eyebrows with surprise 100-year bond sale


(Adds quotes)
    By Luc Cohen and Claire MilhenchBUENOS AIRES/LONDON, June 19 (Reuters) - Argentina has
offered a 100-year bond in U.S. dollars, the finance ministry
said on Monday, just over a year after the nation emerged from
default.
    Investors said there would be appetite for the bond with a
yield of 7.9 percent given the low yields elsewhere in the fixed
income market and the need for pension funds to lock in
long-term returns.
    Still the move came as a surprise given Argentina only last
year ended a decade-long dispute with creditors over its 2002
default and residents tend to frown upon accumulating debt in
dollars.
    "It's awfully premature for Argentina to issue 100-year
bonds," said Jorge Piedrahita, chief executive officer of Puma
Investments, who said he would "sit on the sidelines" for this
bond. "When you look back in history, I'm not sure we can find a
20-year period where Argentina has not defaulted."
    The finance ministry tweeted a confirmation of the
100-year-bond issuance, first reported by Thomson Reuters IFR,
which is  expected to be priced later on Monday. But the
ministry did not give details on the amount of bonds to be sold.
    A representative said details would be disclosed later this
afternoon.
    Finance Minister Luis Caputo had previously said Argentina
would meet the rest of its financing needs in non-dollar
currencies after selling $7 billion in dollar bonds in January.
The country plans to sell $10 billion in foreign currency bonds
this year to help finance a fiscal deficit of 4.2 percent of
gross domestic product this year.

    BOND PRICES FALL
    Argentine sovereign bond yield spreads over U.S. Treasuries
widened six basis points, the widest in a month <.JPMEGARGR> at
412 basis points. The country's 2038 dollar bond <AR050119564=>
fell 1 cent to a two-week low while the 2046 issue fell more
than 2 cents <US040114GY03=R>.
    The 2032 par bond <AR050119564=> was down by 2.5 percent.
    "We like the credit. We like the story and we are overweight
Argentina. But we don't like duration at the moment," said Kevin
Daly, portfolio manager at Aberdeen Asset Management in London,
saying demand for the bonds had reached $6 billion so far.
    Citigroup Inc <C.N> and HSBC <HSBA.L> are acting as lead
book runners on the deal, while Nomura Securities <8604.T> and
Banco Santander <SAN.MC> are co-managers. [nL1N1JG0CK]
    Such long-term bonds are unusual, particularly in emerging
markets. Mexico issued a 100-year bond in 2010. Most recently,
Ireland issued a century bond last-year with a 2.35 percent
coupon, according to IFR.

    LEGACY OF MACRISMO
    Since taking office in late 2015, President Mauricio Macri
has implemented several market-friendly reforms to deliver on
his promise of normalizing Argentina's economy after years of
heavy state intervention and non-payment of international debt
obligations under the previous government.
    He ended a decade-long dispute with creditors that allowed
it to re-enter global credit markets last year, but Argentina
lacks an investment grade rating. S&P and Fitch rate the
sovereign a B with a stable outlook, while Moody's has the debt
at B3.
    The country sold 400 million Swiss francs ($410.64
million)in debt in March, and Caputo said on June 7 that
Argentina would issue peso and euro bonds later this month.
[nL1N1J41G9]
    Many Argentines, with memories of the severe economic crisis
following a 2002 default, took to social media to express their
surprise, some with a touch of humor. One asked if Argentina
would exist in 100 years, and another said at least cockroaches
would pay off the debt.
    Axel Kicillof, former finance minister who led negotiations
with holdouts under populist ex-President Cristina Fernandez,
accused Macri of saddling 10 generations of Argentines with
debt. [http://bit.ly/2sL0S2f
]
    "They say nothing bad can last for 100 years. The legacy of
Macrismo shows it can," he wrote on Twitter.

($1 = 0.9741 Swiss francs)

 (Reporting by Luc Cohen in Buenos Aires, Dion Rabouin  New York
and Sujata Rao and Claire Milhench in London; Writing by
Caroline Stauffer; Editing by Clive McKeef and Cynthia Osterman)
 ((caroline.stauffer@tr.com; ++54 11 4510 2591, ++54 9 11 5830
7443  ; Reuters Messaging:
caroline.stauffer.thomsonreuters.com@reuters.net;  Twitter:
@carostauffer))

Keywords: ARGENTINA BONDS/ (UPDATE 3)



This article appears in: Politics , Fundamental Analysis , Stocks , World Markets , Bonds


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