Financial plan provides some calm to Argentina bonds
Sovereign to tap local markets to cover net funding needs in 2019
ARGENTINA will tap the local markets to cover
US$8bn in net funding needs in 2019, the
lNANCEûMINISTRYûSAIDûLASTûWEEKûASûITûSOUGHTû
TOûPROVIDEûCONlDENCEûINûWHATûREMAINSûAû
nervous investor base.
Both bond and stock prices jumped following
the presentation amid expectations that the
GOVERNMENTûWOULDûHAVEûFEWûPROBLEMSûPAYINGû
DOWNûDEBTûOVERûTHEûNEXTûYEARûORûSO
h4HEûBOTTOMûLINEûISûTHATûTHEûlNANCIALû
programme for both 2018 and 2019 should
BEûEASILYûCOVEREDûINûTHEûDOMESTICûMARKET vû
SAIDû-AUROû2OCA ûAûSOVEREIGNûANALYSTûINûTHEû
emerging markets group at asset
MANAGEMENTûlRMû47#
h#URRENTûBONDûSPREADSûAREûNOTûCONSISTENTûWITHû
THISûOUTLOOKû4HEYûAREûEXCESSIVELYûHIGHûINûOURûVIEWv
4HEûYIELDûONûTHEûûS ûWHICHûWEREû
ISSUEDûINû*ANUARYûTHISûYEARûASûPARTûOFûAû
53BNûBONDûOFFERING ûDROPPEDûTOûûLASTû
WEEKûFROMûASûHIGHûASûûAûWEEKûORûSOû
before, according to Thomson Reuters data.
But it remains some distance from the
ûSEENûJUSTûTHREEûMONTHSûAGO
Argentina assets have been on a roller-
COASTERûRIDEûEVERûSINCEûTHEûCOUNTRYûWASû
FORCEDûTOûGOûCAPûINûHANDûTOûTHEû)-&ûINû-AYûASû
it struggled to contain a sell-off in the peso.
Domestic and international principal bond
PAYMENTSûOWEDûNEXTûYEARûSTANDûATû53BNûANDû
53BN ûRESPECTIVELY ûACCORDINGûTOûTHEû
-INISTRYûOFû4REASURYSûPRESENTATIONû4HATûISû
PARTûOFûAûTOTALûOFû53BNûINûDEBTûANDûPRINCIPALû
INTERESTûPAYMENTSûFALLINGûDUEûINû ûITûSAID
“The market reaction to the announcement was
PRETTYûGOOD vûSAIDû!LEJOû#ZERWONKO ûANûEMERGINGû
MARKETSûECONOMISTûATû5"3û7EALTHû-ANAGEMENT
“It was smaller than what the market was
EXPECTINGû4HEREûWASûSOMEûUNCERTAINTYû
ABOUTûHOWûMUCHûOFûTHEû53BN û)-&ûDEALû
WOULDûSUBSTITUTEûEXTERNALûMARKETûlNANCINGû
SOûTHISûPROVIDESûMOREûCLARITYv
The government still needs to issue
53BNûTHISûYEARûWHICHûITûISûEXPECTEDûTOûDOû
THISûMONTHûLOCALLY ûOFFERINGû,EBACûHOLDERSû
THEûOPPORTUNITYûTOûSWAPûINTOû4REASURYûNOTESû
in an effort to reduce the large stock pile of
central bank instruments.!LLûTHESEûNUMBERSûASSUMEûABOUTûû
GROWTHûFORûûANDûûNEXTûYEAR ûNOTûTOû
MENTIONûAûûROLLOVERûOFûLOCALû,%4%3û
instruments.
4#7Sû2OCASûSEESûSUCHûASSUMPTIONSûASû
realistic and even expects growth to be
HIGHERûTHANûTHATûLEVELûTHISûYEAR
"UTûTHEûGOVERNMENTSûABILITYûTOûHITûlSCALû
targets while maintaining economic growth
ANDûPOLITICALûSUPPORTûAHEADûOFûNEXTûYEARSû
presidential elections is still open to debate.
Achieving those goals are seen as a vital
PARTûOFûREGAININGûINVESTORûCONlDENCEûANDû
LESSENINGûTHEûCOUNTRYSûNEEDûONû
international bond funding.
4HATûISûPARTICULARLYûIMPORTANTûATûAûTIMEû
WHENûAûRISINGûDOLLAR ûTIGHTERûMONETARYû
conditions in the US and global trade
TENSIONSûHAVEûINVESTORSûRETREATINGûFROMû%-
h!RGENTINAûNEEDSûEXTERNALûHELP vûSAIDû
#ZERWONKOûh7ITHOUTûANûIMPROVEMENTûINû
external conditions the struggle will
CONTINUEv
Paul Kilby FRONT STORY MEXICO
Wait-and-see approach after AMLO victory
Investors take comfort from more conciliatory tone
Investors are taking a wait-and-see approach
to Mexican credit after populist candidate
!NDRESû-ANUALû,OPEZû/BRADORû!-,/ ûWONû
AûLANDSLIDEûVICTORYûDURINGûTHEûPRESIDENTIALû
ELECTIONûONû*ULYû
Following campaign rhetoric that had
UNNERVEDûMANYûINûTHEûMARKET ûTHEûBUYSIDEû
AREûlNDINGûSOMEûCOMFORTûINûTHEûPRESIDENTû
ELECTSûEFFORTSûTOûSTRIKEûAûMOREûMODERATEûTONE
“The initial statements from the
PRESIDENT
ELECTûHAVEûBEENûCONCILIATORY vûSAIDû
'RAHAMû3TOCK ûHEADûOFû%-ûSOVEREIGNû
RESEARCHûATû"LUE"AYû!SSETû-ANAGEMENT
h(EûHASûPROMISEDûlNANCIALûANDûECONOMICû
STABILITY ûANDûTOûGOVERNûFORûALLû-EXICANSû
EVENûWHILEûPRIORITISINGûTHEûPOORv
!-,/ûSAIDûHEûWOULDûSEEKûTOûREMAINûINû
Nafta, respect central bank independence,
ASûWELLûASûMAINTAINûlSCALûDISCIPLINEûANDûAû
mOATINGûRATEûREGIMEûTHATûHASûWORKEDûWELLû
FORûTHEûCOUNTRYûDURINGûPASTûCRISES
%VENûSO ûAûLENGTHYûPERIODûBETWEENûTHEû
ELECTIONûANDû!-,/SûINAUGURATIONûINû
December causes some unease among
INVESTORSûIMPATIENTûFORûMOREûCLARITYûONûTHEû
NEWûGOVERNMENTSûPOLICYûINITIATIVES
h7EûNEEDûMOREûDETAILS vûSAIDû3HAMAILAû
+HAN ûDIRECTORûOFû!LLIANCE"ERNSTEINSû
emerging market debt strategies.
“The transition period is too long. The
SOONERûTHEYûCOMEûOUTûWITHûMOREûCLARITYûONû
POLICIESûTHEûBETTERûITûWILLûBEûFORûASSETûPRICESv
4HEûFATEûOFûSTATE
CONTROLLEDûOILûCOMPANYûPEMEX
is a particular source of concern given fears that
!-,/ûCOULDûROLLûBACKûTHEûENERGYûREFORMSûSOû
WELCOMEDûBYûTHEûMARKETûJUSTûlVEûYEARSûAGO
Pemex bonds were the clear
UNDERPERFORMERûLASTûWEEKûINûANû%-ûSPACEû
ALREADYûCONCERNEDûABOUTûAûRISINGû53ûDOLLARû
ANDûANYûPOTENTIALûFALLOUTûFROMû0RESIDENTû
4RUMPSûPROTECTIONISTûTRADEûPOLICIES
7HILEûMEXICOSûûBONDSûWEREûJUSTûûOFûAû
POINTûLOWERûATû
ûTHEûMORNINGûAFTERûTHEû
ELECTION û0EMEXSûûûTUMBLEDûOVERûTWOû
POINTSûTOû ûACCORDINGûTOû-ARKET!XESSûDATA
h4HEûMARKETûTODAYûISûWEAKûANDû-EXICOûISû
REmECTINGûTHEûBETAûINûTHEûMARKETûATûTHISû
STAGE vûSAIDû+HANûATûTHEûTIME!-,/ûCAMPAIGNEDûONûFREEZINGûFUELûPRICESû
ANDûBUILDINGûNEWûRElNERIESû
ûMOVESûTHATûWOULDû
LIKELYûHURTûTHEûDEBTûLADENû0EMEXû)TûISûUNCLEARû
whether Pemex would be forced to bear the
COSTSûOFûANYûPRICEûFREEZE ûANDûTHEûlRMû
ûWHICHû
HASû53BNûINûDEBTû
ûCANûHARDLYûAFFORDûTHEûUPû
TOû53BNûREQUIREDûTOûBUILDûTHEûNEWûRElNERIESû
PROPOSEDûBYû!-,/ ûSAIDû-OODYS
h4HISûCOMPANYûJUSTûDOESNTûHAVEûTHEûABILITYû
TOûSUPPORTûANYûOFûTHOSEûPOLICIES vû+HAN
How the new government tackles the
ENERGYûSECTORûISûSEENûASûKEYûTOûRATINGSûANDû
INVESTORSûPERCEPTIONûOFûTHEûCREDITûASûTHEû
GOVERNMENTûBALANCESûlSCALûDISCIPLINEûWITHû
efforts to bolster economic growth.
h4HEûENERGYûSECTORûISûIMPORTANTûFORû
-EXICOSûDEVELOPMENT vûSAIDû30ûCREDITû
ANALYSTû*OYDEEPû-UKHERJI
h/NEûOFûTHEûREASONSû-EXICOûHASûSTABILIZEDû
THEûBUDGETûDElCITûWASûBECAUSEûITûCUTûCAPITALû
spending. This has a cost on future growth
SOûYOUûHAVEûTOûENCOURAGEûPRIVATEûSECTORû
INVOLVEMENT ûINûTHEûENERGYûSECTORv
Paul KilbyEMERGING MARKETS
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