Argentine shares and bonds rose on Wednesday after the death of political heavyweight and former President Nestor Kirchner removed from the 2011 election campaign a contender seen as unfriendly to markets.
A market holiday in Argentina muted local prices, but investors immediately bid higher Argentine credit-related and equity-related assets trading in global markets following the news.
Sincerely, for Argentina and from a market perspective there is nothing better than knowing that Kirchner will be out of the presidential race of next year. For years his confrontational, resentful style toward investors, companies and bond holdouts deprived Argentina of much-needed capital, said Roberto Sanchez-Dahl, who oversees $1.1 billion in emerging market debt for Pittsburgh-based Federated Investment Management.
According to data provider Markit, Argentina's credit default swaps spread narrowed by 39 basis points to 659 basis points. CDS are insurance-like instruments that help investors protect investments from default or credit restructurings.
Argentina is still wrestling with fallout from its 100 billion US dollars sovereign default in 2002. Kirchner, president from 2003 to 2007, was widely expected to run for re-election in 2011.
His combative and outspoken criticism of big business and political rivals did not endear him to international investors. He refused to settle with hold-out investors who sued the government over the 2002 default, keeping Argentina from freely raising capital in the international markets.
Argentina's restructured U.S. dollar-denominated debt rose on Wednesday. The 2033 Global Discount bonds were bid up 1.375 points in price to 90.56. The 2038 Par bonds were bid up 0.812 points in price to 44.625.
The spread between the yield on benchmark Argentine bonds and comparable U.S. Treasuries narrowed by 38 basis points to 544 basis points, with total returns up 2.67 percent. Initially, spreads tightened by as many as 70 basis points according to the benchmark JP Morgan Emerging Markets Bond Index Plus.
U.S. traded shares of Argentina's BBVA Banco Frances SA rose 4.6 percent to $12.50 while Tele Argentina gained 9.71 percent to $24.97.