Argentina’s Dollar Bonds Decline as Uncertainty Looms
Argentina’s Sovereign Bonds Experience Significant Drop
Argentina’s dollar-denominated bonds saw a notable decline of up to 4.3 cents on the dollar following Sunday’s general election, where Economy Minister Sergio Massa unexpectedly emerged as the front-runner. The country’s 2046 overseas note suffered the most significant decrease, with a bid of 22 cents on the dollar. Other notes also experienced declines, ranging from 2.35 to 4.22 cents on the dollar, according to MarketAxess data at 1122GMT.
Impact on Share Prices
The U.S.-listed shares of Cresud SACIF y A and Banco BBVA Argentina (NYSE:) also took a hit, falling 3.1% and 4.3%, respectively, in pre-market trading. The election results came as a surprise, as the ruling Peronist coalition surpassed expectations and emerged as the leading party. This outcome sets the stage for a polarized run-off vote on November 19 between Sergio Massa and far-right radical Javier Milei.
Uncertainty Surrounding the Candidates
The unexpected rise of Massa and Milei has sparked concerns about increased uncertainty in Argentina. Graham Stock, a senior EM sovereign strategist at RBC BlueBay Asset Management in London, commented on the situation, stating, “Massa and Milei both herald greater uncertainty.” The key question regarding Massa’s potential government is which strand of the broad Peronist coalition would dominate, while in Milei’s case, it is how much of his radical economic and social agenda he would be able to implement.
Polarized Economic Models
The surprising strength of the Peronists, despite high inflation rates, has set up a second round between two vastly different economic models for Argentina. While investors had expected Milei to reach the runoff, Massa’s strong performance means that market-friendly candidate Patricia Bullrich is out of the race. This development has negative implications for asset valuations. Bruno Gennari, an emerging markets strategist and Sales at KNG Securities LLP, highlighted the significance of the opposition coalition’s response to the winning candidates, as some members may not fully embrace Milei.
Massa and Milei’s Current Standings
Massa secured 36.6% of the vote, surpassing Milei, who received just over 30%. Conservative candidate Bullrich trailed behind with 23.8%. Kimberley Sperrfechter, an emerging markets economist at Capital Economics, noted that both Massa and Milei would need to win over Bullrich voters to secure victory.
It is essential to closely monitor the developments in Argentina’s political landscape as the second round approaches. The outcome will undoubtedly shape the country’s economic future.
