Argentina: a bond offering shows the drama
Many indicators show what is going on in Argentina’s economy. Let me bring a just one piece of news that will give us also a clear picture of the situation: https://www.cronista.com/finanzas-mercados/pese-a-la-tension-en-mercados-colocan-obligacion-negociable-por-us-15-millones/
Fyo is an agribusiness consulting firm, part of a larger group Cresud/Irsa. In October 2021 fyo went to the market in its first move in a program to eventually raise 50 million U$S. In this first stage they offered a dollar-linked corporate bond for $10 million at zero interest rate and got offers for 26,7 million dollars, of which they took 12,3 million. So far, so good.
Last week they went for the second round to raise another $15 million…, and they got offers for a billion dollars!
This is a three-year bond the investor buys with pesos but it is nominated in “official” dollars. First of all, the one billion offer shows investors trying to get rid of the pesos they have and they are too many. But at zero return? Well, it shows they are expecting a devaluation of the government controlled exchange rate in the future, that will be their return.
They also think the company will honor the bond since it has its revenues linked to the government exchange rate.
Now, what may happen with government dollar-linked bonds? May the government get offers as high as those to fyo? It does have some “dollar-linked” revenues like import and export duties, but the rest are mostly in pesos…