Argentina

Downgrades from two rating agencies crowned a disastrous week for Argentine assets, and there was no relief over the weekend as the finance minister resigned and the country’s likely next president appeared to hint at the possibility of debt restructuring.

A surprise result in last Sunday's primary elections in Argentina triggered hefty losses for emerging market investors this week. Many feared another sovereign default as Argentina assets, and its currency, took an absolute kicking. But by Thursday, writes Oliver West, some felt that bruised and battered investors could be missing out on a chance to snap up cheap assets.

As Argentine assets endured a torrid Monday on the back of Mauricio Macri’s poor performance at the weekend’s primary, analysts warned that the peso’s harsh devaluation would push public debt — which is largely in hard currency — up to perilous levels. This could accelerate a sovereign default, said Capital Economics.

Bond market analysts said that conversations about Argentina assets would return to the likelihood of default as market-friendly president Mauricio Macri suffered a heavy defeat in Sunday’s primary elections.

The rout of the incumbent president Mauricio Macri in the first round of the Argentina elections has investors worried. Argentina’s debt, and that of other 'vulnerable' credits, suffered a huge sell-off early on Monday. But bankers believe that it was not so bad that the primary market will not reopen in September.

Compañía General de Combustibles (CGC), the Argentine oil and gas exploration and production company, will receive a rating upgrade from Standard & Poor’s if it is able to refinance a $300m 2021 note with a new bond.

Argentina’s leading telecoms company became the latest borrower from the country to tap international investors on Thursday, but though bond investors showed plenty of enthusiasm for Telecom Argentina’s bond comeback, some were wary about oversupply from the country.

Argentina’s best borrowers continue to seek to take advantage of a recently opened funding window in international markets, with Telecom Argentina plotting to sell new debt to refinance old bonds.

Pampa Energía followed YPF into the international bond markets on Tuesday as Argentine issuers returned after a 14 month hiatus. Investors believe there is scope for certain corporates and even provinces from the country to take advantage of renewed market access.

The Latin America primary bond market was quiet this week thanks to dollar investors instead enjoying the US Independence Day holiday, but bankers say sentiment is at its strongest at least since January 2018 as several of the region’s issuers lined up roadshows.

Bond market participants in Argentina say that more issuers from the country could look to pre-empt election-related uncertainty and take advantage of benign fundraising conditions after Pampa Energía followed in YPF’s footsteps with a 10 year deal on Tuesday.

Bond investors will have a chance to give a further indication of their appetite for Argentine risk as Pampa Energía looks to follow in YPF’s steps and continue to reactivate the primary markets from the country.