Argentine Bonds Fall After Fernandez Wins Presidential Vote
(Bloomberg) -- Argentine bonds dropped by the most in about eight weeks on Monday as investors sought more clarity on economic policy under Alberto Fernandez and his running-mate Cristina Fernandez de Kirchner after the team swept to a first-round victory in the presidential vote.
Bonds due in 2046 fell to 40.4 cents on the dollar from 42.4 cents on Friday, the biggest decline since Sept. 3 and leading losses among emerging-market peers. The extra yield investors demand to hold the bonds jumped 76 basis points to 22.47%, while the peso’s unofficial rate slipped to almost 82 per dollar from 80 on Friday. Strict new post-vote currency controls that limit savers to purchasing just $200 per month are stifling the foreign-exchange market.
Argentine stock, bond and currency markets have tumbled since a stunning August primary vote showed Fernandez was likely to become the nation’s next leader. Investors are now watching for the final composition of congress and how that may impact key legislation, including a debt restructuring. They’ll also eye any details of Fernandez’s economic plan.
“Those are the key things to watch,” said James Barrineau, the New York-based head of emerging-market debt at Schroders, who holds Argentine bonds under the $565.5 billion he helps manage. “The split congress, on the other hand, was we think a positive outcome for markets and indicates that the Peronists will not have a free hand on key economic policy changes going forward.”
Read More: Argentina’s Election and Currency Controls: All You Need to Know
In a Sunday evening speech, Fernandez called on all Argentines to rebuild the country. Alongside him, Kirchner asked Macri to take any measures needed to address Argentina’s financial issues. The comments didn’t explain who will make up the new economic team, or address bondholders or the International Monetary Fund directly. Macri and Fernandez met on Monday morning at the Casa Rosada.
Argentine assets plunged after Fernandez upset Macri in an August primary vote as fear of a default sunk in. As of Friday, credit-default swaps showed traders pricing in a 96% chance that Argentina suspends debt payments in the next five years. The peso, which lost more than 20% of its value after the primary, has since been buoyed by foreign reserves and capital controls that staunched an outflow.
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