Investors no longer believe Argentina is bound to default, as President Javier Millay’s plan to rebuild South America’s second-largest economy has won bond market support.
Ultra-yield investors are clamoring to hold Argentine securities as U.S. Treasury yields ended below 10 percentage points on the same date, according to JPMorgan Chase data. This is a level that traditionally signals distress, according to data from JPMorgan Chase & Co. Spreads are at their lowest levels since August 2019. Former President Mauricio Macri took office.
Bond investors have enthusiastically thrown their support behind Mr. Milley’s ambitious reform plans in recent months. Prices for some of Argentina’s government bonds have risen to their highest since they were issued in the fiscal restructuring in September 2020, with markets pricing in a higher chance of Argentina successfully paying off its debt in January. .
Money managers are also optimistic that Mr. Milley will maintain his popularity while continuing to make progress toward beating triple-digit inflation and reversing years of rampant budget deficits.
Since Mr. Milay took over in December, spreads with U.S. Treasuries have narrowed by about 941 basis points, sparking a wave of bond sales by Argentina’s biggest companies. Still, some on Wall Street warn that the government has a long way to go before implementing the idea of returning to the market.
The country’s bonds have returned investors 73.5% this year, the highest among developing countries, according to data compiled by Bloomberg.
Written by Kevin Simauchi, Bloomberg
