Foreign investors balk at first Argentine dollar since default
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Foreign investors balk at first Argentine dollar since default

Soevereign forced to sell debt to state owned bank

Argentina was forced to sell the bulk of its first dollar denominated bond since its default to its state owned bank when investors baulked at the below-market yield the sovereign was demanding for the deal.

Of the $631.6m of domestic Boden 2015 dollar bonds sold by the government this week, $493m was taken up by Banco de la Nacion, at a yield of 8.75% when its outstanding Boden 2012s and 2013 dollar bonds were trading between 9% and 9.25%.

The rest went to local banks.

"It looks like Nacion got a nice friendly call from its favourite borrower," said one banker.

Little, if any, of the bonds were bought by international investors.

"The market rates are what they are, so to get the yield they wanted this was the only way they could do it," said one Argentine fixed income analyst at a bank in New York.

The outcome is all the more painful considering the government had dumped offers from local and international investors for $800m of the 2015s on September 21, a deal it pulled because the clearing bid of 8.8% in yield for the bonds at the time was above the 8.3%-8.5% yield the government wanted.

"They decided to pull that deal because they thought they could get better rates in a month's time," said the fixed income analyst.

Argentina, like some other Latin American borrowers, is having difficulty adjusting its expectations to what has been a complete repricing of emerging market debt instruments now that US Treasury rates have surged in recent weeks.

Argentina now needs to raise about another $400m before the end of this year, which might be taken up by Venezuelan president Hugo Chavez. Chavez has said Venezuela would invest about another $500m in Argentine government bonds. 

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