December 12, 2013
Stocks drop after new debt exchange
‘Blue’ dollar surges, local bonds decline while country risk rises
Argentine stocks closed in yesterday’s trading with a drop while New York-law bonds and the black market or so-called “blue” dollar went up, following the announcement of a bill submitted to the Senate by President Cristina Fernández de Kirchner which aimed at reopening debt swap for international creditors.
The country’s risk premium rose 37 basis point to 1,113 basis points, according to JP Morgan’s index, representing a rising spread in the yield between the Argentine bonds and comparable US Treasuries. Argentina’s five-year default swaps jumped as much as 350 basis points, before settling with an 85 basis-points rise.
Bonds related to Argentine GDP lost an average of 4.41 percent, with the main drop registered by the TVPA that decreased 8.22 percent. The TVPE dropped 4.50 percent, TVPP 2.20 percent, TVPY 3.61 percent, TVYO 3.56 percent and Boden 2017 1.4 percent. The exception was Bonar VII, which expires in September and went up two percent.
“The uncertainty after the President’s announcement affected the market, that reacted on a negative way, “ Santiago Llul, vice-president of Futuro Bursatil brokerage, told the Herald.
New York-law bonds, instead, continued to climb with traders echoing both last week’s ruling by Judge Thomas Griesa in favour of vulture funds -fighting Argentina in a US$1.3 billion legal dispute-,and the government-sponsored bill for a new debt swap. The Global 2012 bond raised 2.7 percent and the Par bond in dollars 1.6 percent. “Bonds with foreign legislation have turned more appealing to investors now and because of that they increased their value,” Mauro Morelli, broker at Rava, told the Herald.
Buenos Aires’ Merval benchmark stock index closed with a drop of 1.26 percent, reaching 3848.02 points at the end of the day. The main drops were registered in stocks of Banco Francés (4.11 percent), Macro (3.61 percent), Aluar (3.44 percent), Siderar (3.09 percent) and Pampa Energía (3.03 percent).
“All the leader stocks of banks and companies dropped yesterday and that lead to the decrease of the Merval index,” Alexander Zawadzki, head of Schweber brokerage, told the Herald. “It’s also related to a negative context in Wall Street that is worried due to the tensions in Syria.”
The “blue” dollar also reacted to the president’s announcement and rose to 9.55 pesos, stretching the difference with the official dollar to 70 percent and accumulating so far in August an increase 10.40 percent. The official dollar closed yesterday at 5.65 pesos, going up a cent.
“The risk of a default always implies people buying more dollars and its increase. If the US Supreme Court decides not to rule or rules against Argentina, that would mean falling into default,” Morelli said.
On its way to the Senate
Economy Minister Hernán Lorenzino and Deputy Economy Minister Axel Kicillof will go before the Senate today to explain the details and defend the bill to reopen the debt swap for the third time. Both officials will attend the meeting of the Budget and Treasury committee and the Economy and Finance committee, which will meet at 11 am in the Blue Room of the High Chamber. The bill was expected to be formally submitted to the Senate last night at press time.
Members of the Radical party (UCR) and centre-right PRO party anticipated they will vote in favour of the bill and consider the decision to reopen the debt swap positive, while party leaders of the UNEN coalition said they will not back the plan.