Argentina launched a US$7bn two-part bond on Thursday, covering its planned dollar issuance for the year in one fell swoop on the back of more than US$21bn of orders. The deal was the sovereign's third in US dollars since being welcomed back to the international capital markets last year after a protracted fight with creditors, and demand was strong.
The buy side appeared satisfied with pricing on the offering of five and 10-year bonds, and many in the market said Argentina looked attractive compared to other EM and high-yield debt.
We still see Argentina as undervalued and relatively cheap at this level, said Yong Zhu, a senior portfolio manager at DuPont Capital Management.
Leads launched the US$3.75bn 10-year at 7%, at the wide end of 6.875%-7.00% guidance, and the US$3.25bn five-year at 5.625%, or the tight end of guidance of 5.625%-5.75%.
Overall, Argentina's cost of dollar financing was considerably cheaper than last year, when it printed a 2021 and 2026 to yield 6.875% and 7.5%, respectively. Earlier in the week those bonds were trading at yields of 5.21% and 6.66%, or at G spreads of 350bp and 432bp, according to a banker away from the new deal.
Investors see plenty of upside as President Mauricio Macri rolls back the populist policies of his predecessor and tries to steer the economy back onto a sustainable growth path.
Yet while the sovereign's debt is relatively low, the markets are keeping a sharp eye on the fiscal numbers given the country's high primary deficit - and its history of defaults.
Its 2001 default sparked a battle with creditors that kept the country locked out of the international capital markets for 15 years, a deadlock that Macri helped break last year. Yet investors say weak growth and the possibility of fiscal slippage ahead of legislative elections this year remain major risks.