Upon assuming office in 2015, President Mauricio Macri and his economic team immediately set about reforming Argentina’s economy – dismantling capital controls, allowing the currency to float freely and settling a long-standing dispute with creditors. Argentina now reaps the benefits of these reforms with growth and confidence returning once more.
These reforms have also led to positive developments for Argentina’s debt markets, a fact that was perhaps most clearly observed last year when Argentina announced its return to the international bond market with a record-breaking US$16.5 billion dollar-denominated issuance.
Less observed, however, has been the development of, and increased demand for, Argentinian peso-denominated paper as the government’s efforts to rebuild the local currency bond curve start to bear fruit.
We think investors will remain willing consumers of these bonds as long as they can continue to hedge the currency exposure with no impediments to capital repatriation. While for Argentinian corporates, the ability to issue in domestic currency eliminates liability currency mismatches.
Argentina’s debt markets have undergone a remarkable transformation against a backdrop of profound economic and political change. The confluence of development of sovereign, local currency, corporate and foreign exchange markets provides a unique opportunity for investors to gain exposure to this improving story and access what we think constitute some of the most attractive and compelling yields around.
Oliver Williams – Insight, a BNY Mellon company