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Argentina issues US$ 7bn in 5 and 10-year bonds at 5.625% to 7% rate

Monday, January 23rd 2017 - 12:33 UTC
Full article 14 comments

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. Read full article


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  • Marti Llazo

    Even before taking on this additional debt, at rates considerably higher than those paid by the more fiscally disciplined neighbours, Argentina took on more than US$53 billion in new debt. That's more than 11 percent of gross national product in just a few months. So what's another US$7 billion in debt? Just borrow more to pay existing debts and obligations.

    In characteristic argentine fashion, a realistic mechanism for actually repaying the debt hasn't been figured out.

    “ ...the possibility of fiscal slippage...” Weasel words. Read: deficit spending.

    Default, thy name is Argentina.

    Jan 23rd, 2017 - 02:28 pm - Link - Report abuse -1
  • pgerman

    @ Marti Llazo

    It seems to me that you have been reading incorrect information.

    Some people, erroneously, include as “new” national external debt the debt taken by the different Argentine provinces and, even, the debt taken by private companies. This “new” external debt should not be counted as a national debt.

    The reality is that Argentina was forced to take debt for two reasons: 1) to cover the fiscal deficit and 1) to pay old external debt. The first is wrong and I expect that the government to exit the “gradual adjustment” of the fiscal deficit and deepen a serious fiscal adjustment to avoid incurring in additional debt to cover regular expenditures. The second is correct since Argentina has lowered its country risk very much, from about 900 EMBI points to 460 EMBI in less than a year with which the “new” debt allows to cancel the “old” debt with much lower interest rates. About $ 12 billion was taken to pay the lost judgments to bondholders.

    I understand that you hate Argentina but you must get correct information before posting comments with wrong information.

    Jan 23rd, 2017 - 04:56 pm - Link - Report abuse -1
  • Conqueror

    @pgerman. Why? Argies do it all the time.

    Jan 23rd, 2017 - 05:30 pm - Link - Report abuse 0
  • Marti Llazo

    As of last September the national debt in Argentina, including both internal and external debt and not the provincial or municipal debt, rose to over US$ 264 billion. Between January and October last year the national government emitted new debt totaling some US$45 billion. The debt is needed because Argentina is spending more than it takes in from revenues, and large expenditures such as payments for imported energy are expected to keep the country in deficit spending for some time. The national government has predicted that high levels of additional debt will be needed for 2017, around another US$45 billion, of which about US$22 billion is expected to be in new external debt. There is significant risk that the government may be unable to successfully service some of this debt as early as the middle of 2018, while some believe this can be put off for as much as four more years. However, the national government is already attempting to negotiate payment delays on some external debts.

    Jan 23rd, 2017 - 05:30 pm - Link - Report abuse -1
  • Fidel_CasTroll

    Conqueror and Marti Llazo in the same thread? That's your signal to buy Argie stocks.

    Jan 23rd, 2017 - 06:04 pm - Link - Report abuse -1
  • pgerman

    @Marti Llazo

    Let me, once more, correct you. ¿“Between January and October last year the national government emitted new debt totaling some US$45 billion”? Have you included the “short term bonds” called “Letras”? This debt is in pesos and has the goal of sterilize the economy to reduce the effects of the large monetary base.

    I don't know the source of your data but during year 2016 some media showed as “new national external” debt U$D 12.000 millones needed to pay the bondholders (old and not recognized debt), new provincial external debts (around U$D 6.000 millions) and, finally, private companies external debt (around another U$D 6.000 millions). .

    Jan 23rd, 2017 - 06:13 pm - Link - Report abuse +1
  • Marti Llazo

    It would not surprise us to discover that the argentines don't admit to the degree of their indebtedness.

    pgerman: “About $ 12 billion was taken to pay the lost judgments to bondholders.”

    Actually that amount was closer to US$16.5 billion. Significantly different. Which is why we don't have argentines for accountants. And Argentina apparently still hasn't paid all the affected bondholders.

    Following that US$16.5 billion bond issue, the following additional debt was sold by the national treasury: US$24.7 billion in dollars and peso bonds at a value of about US$15.3 billion. The letras pgerman refers to, in pesos and in dollars adds another US$5.8 billion of debt. This brings the 2016 national government debt to a value of US$45.8 billion as of October, and by the end of the year the total debt had risen to values of about US$50 billion. And that doesn't include municipal and provincial debt issuance.

    Jan 23rd, 2017 - 08:44 pm - Link - Report abuse -1
  • pgerman

    @Marti Llazo

    Let me ask again..What's your source of information?

    Basically, it seems you are considering the “national debt” but not the external debt.

    There were U$D 30.364,83 millions in “Letras” the last week of the previous government mostly in argentine pesos (almost U$D 2,000 millions were in U$S). Currently there are U$D 39.585,42 millions in “Letras” but none of them are in U$D.

    Of the U$D 16,500 million only U$D12,000 million were used to pay ALL the bondholders with judgment won.

    I have never mentioned that the public debt is growing but the risk country is plunging to 460 points abd interest rate is now, a llitle more than 5% while the previous year it was around the size of debt doesn't seem to be an issue for the investors...

    Jan 24th, 2017 - 12:43 am - Link - Report abuse 0
  • bushpilot

    This is a dangerous road for Argentina to take. I hope this borrowed money, all of it, is put to good use, pays for itself, and creates money, like a loan is supposed to do.

    Politicians, no matter from what country, are not responsible about borrowed money though.

    I have a bad feeling about this. I hope Macri does right by his country.

    Jan 24th, 2017 - 01:48 am - Link - Report abuse 0
  • Enrique Massot

    Reality is, what is going on in Argentina is a party for the ultra wealthy while the economy shrinks and incomes, expenses and job sources for everybody else go down.
    What we witness is the revenge of the wealthy classes, deeply upset by previous improvements that led to doubling the size of the middle class during the Kirchner years.
    The country's upper classes are again showing their myopia--they cannot accept that the country becomes like other developed countries with a strong domestic sector that keeps the economy chugging along, even softening the impact of international downturns.
    Nope. The Argentine rich believe the poor need to be kept at their place.
    The new president of the Banco Nacion, Javier González Fraga, famously said last May that Argentines had lived a carnaval during the Kirchner era and that is not feasible anymore.
    “They made mid-level employees believe that their wages could be used to buy cellular phones, plasma TVs, cars, motorbikes, and travel abroad.”
    About growth in 2017, this example of the elites' way of thinking predicted that “the country will not growth to allow more spending on food and energy such as fuels and natural gas, and to keep expenses in clothing, entertainment and going out. That is not possible.”
    Difficult to grasp for non-Argentines, this incredibly selfish group of people, who usually have their fortunes conveniently nested in offshore accounts and tax havens, are ready to do all they can to get the country backwards, even at the cost of another major crisis--that as usually, will hit the poor and the middle classes.
    As many now say down there, “this is a movie we've already seen--we pretty well know how it ends.”

    Jan 24th, 2017 - 03:24 am - Link - Report abuse -1
  • Marti Llazo

    Yes, pgerman we are discussing national debt, of which foreign debt is an enormous portion. And we should probably also discuss the magnitude of the deficit spending as well as wild guesses about how much it could worsen if the dreamy best-case scenarios don't magically appear. Because predictions of improvement just haven't been coming true, pretty much as I predicted in late 2015, because there was no serious basis for that sort of gauzy prognostication and there isn't now, either.

    @b-pilot -- That borrowed money is paying for a lot of social programmes, as borrowed money here in Argentina often does. And for the effects of inflation. And a lot of expensive imported energy, since commercial and residential consumption are still massively subsidised and the country pretty much rejects modern notions of energy conservation and efficiency, and thus remains an energy hog. There is a lot of other national money spent on every sort of subsidy imaginable since much of the industry is inefficient and non-competitive. So is that borrowed money being spent “wisely” ? Some of it. Argentina has a lot of catching up to do with decayed or nonexistent infrastructure and maintenance. Even basics like sewage treatment, where there are serious acknowledged deficiencies. I heard the other day that one out of three workers here is a government employee, and to that I submit that most are grossly overcompensated for what services are actually produced. The padding in government is even worse than in subsidised private industry here, and that is before you figure in the inevitable corruption costs. All levels of government here need to lose some of that padding and learn the basics of efficiency and the shedding of low-value and counterproductive functions. So far the governments here have not done much in reducing their bloated bureaucracies, preferring instead to keep borrowing money to keep things pretty much as they have been.

    Jan 24th, 2017 - 03:34 am - Link - Report abuse -1
  • Fidel_CasTroll

    Your concern is almost heart touching bushpilot. If only you used a little bit of it for your own nation, which I think in a few weeks will hit the proud milestone of ?

    Debt which will never ever ever ever ever be repaid, as anyone with a third of a chimp's noggin knows. Yet your new president wants to double military spending lol... and cut taxes, and restrict trade which depresses economic activity.

    A few smaller defaults vs one spectacular nation ending default, amount almost to the same. They USA is headed for a spectacular default from which it will not survive.

    Jan 24th, 2017 - 07:22 am - Link - Report abuse -1
  • Englander

    Investors must hope that Kirchner never returns to power.

    Jan 26th, 2017 - 08:54 am - Link - Report abuse 0
  • Marti Llazo

    Reekie must be very pleased that the US is going to refuse imported lemons from Argentina, since that might make them a peso or so cheaper on the domestic market. But more importantly, it will cut into potential profits for Argentine exporters. Something that always pleases reekie.

    Meanwhile, the failure during many past years to invest in public works such as flood control is reminding us of the real legacy of Kirchnerism again. According to the local industry reports, a national dairy production reduction of about 20% is expected due to the flooding, with resulting price increases to consumers.

    You can pay me now, or you can pay me later.

    As my neighbour here pointed out, the national public-works funds that CFK's government lavished on Báez to uselessly pave the little-used back-roads in the empty deserts of her home Santa Cruz province might have been put to better use in better roads and flood control investment in the more productive parts of the country.

    Jan 26th, 2017 - 12:24 pm - Link - Report abuse 0

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