A Not So Subtle Hint That Argentina May Be Un-Fixed

A Not So Subtle Hint That Argentina May Be Un-Fixed

The Argentinian 2015 bonds are getting destroyed!!

They were trading near Par at year-end!!

With the IMF frantically scrambling to cover its forecast errors and model-breakdowns amid an emerging market turmoil that no one could have seen coming, the contagion is beginning to spread. With all eyes fixed on Turkey (unfixed again) or Ukraine (never fixed), Argentina’s troubles are exploding. The last few days have seen yields on their 2017 bonds scream higher from 11% to 19%… and 2015 Boden prices collapse.

This is the worst in emerging market bonds and the price/yield is back at the lows/highs since October 2012. With the peso’s dramatic 15% devaluation last week stabilized in the official rate around 8/USD, the blue-dollar rate is back at its worst around 12.80 implying more pain to come.

5Y CDS are trading 2700bps = +1000bps in 2014

These are 3-year maturity bonds!

As Bloomberg notes,

Argentina is losing foreign currency reserves at the fastest pace in more than a decade as estimated 28 percent inflation and currency controls spur capital flight. The funds, which the country relies on to pay debt and finance energy imports, dropped to a seven-year low of $28.3 billion. The government devalued the peso 15 percent last week and raised benchmark interest rates as much as 6 percentage points. The moves, coupled with less risk appetite for emerging market assets, haven’t settled investor concerns.

There is fear and panic about the emerging markets and the news has not been good out of Argentina with reserves dropping $250 million yesterday,” said Russell Dallen, the head trader at Caracas Capital.

Charts: Bloomberg

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