‘Century Bonds’ Take on New Meaning After Argentine Market Rout

(Bloomberg) -- Argentina’s century bonds may have been in the spotlight as the country’s assets tumbled this week, but there’s another 100-mark looming: the yield on its domestic securities.

Peso bonds have lost almost half their in dollar terms since President Mauricio Macri’s defeat in last weekend’s primary election, which sparked fears that populist opposition leader Alberto Fernandez will defeat him in the main vote in October. Prices on short-dated securities maturing in November next year have collapsed to 63 cents, equating to a yield of 89%.

Losses on external debt have also been severe. Argentina’s dollar bonds are now the cheapest in the world, with average yields climbing to 27% on Wednesday from 11% last week, according to Bloomberg Barclays indexes. It’s a clear signal that traders think Argentina’s government may default on its obligations.

Franklin Templeton’s Michael Hasenstab and Ashmore are among the investors that have been hurt by the sell-off.

Still, the rout may have ended after Macri spoke with Fernandez on Wednesday to address the uncertainty ahead of the Oct. 27 election. Argentine Eurobonds gained on Thursday and spreads over U.S. Treasuries fell 132 basis points to 18.25 percentage points as of 1:20 p.m. in London, according to JPMorgan Chase & Co. indexes.

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