Argentina’s 10% yields tempt bond buyers as election risks build
Bonds at double-digit yields are proving attractive to investors willing to shrug off fears about President Javier Milei’s re-election bid. Leer más
Argentina’s sovereign bonds, currently yielding over 10%, are attracting investors despite concerns about President Javier Milei’s waning popularity and the upcoming elections next year. Financial institutions such as Vontobel, Schroders, ProMeritum, and Morgan Stanley have increased their exposure to Argentina. Morgan Stanley’s strategists suggest that the yields are "too cheap" to ignore, even with the political uncertainties.
Thomas Haugaard, a portfolio manager at Janus Henderson Investors, believes this is an opportune moment to invest rather than gamble on the election outcome. Fernando Gimenez, a strategist at ProMeritum, notes that despite the political volatility, Argentina’s fiscal strength, growing forex reserves, and fragmented Peronist movement make for a less risky investment at this time.
Fernando Gimenez believes the market levels are an attractive entry point compared to other emerging market credits. The country's economic shock therapy appears to be losing steam, with falling growth forecasts, weak labor market, and declining popular support. Recent political pressures, like the watering down of foreign land ownership laws, have also tested the administration's reform plans.
Milei's administration has faced criticism after abandoning a key section of the land ownership law, causing bond prices to fall sharply. Despite the sell-off, Argentina’s dollar bonds have slipped over 6% since the end of July, the worst performance among emerging markets. Some investors attribute the decline to local investors who hold a significant portion of the outstanding dollar notes.
However, the bonds still present a compelling value proposition, offering a significant spread improvement compared to other emerging market bonds. JPMorgan Chase & Co. and Barclays Plc have doubled down on their overweight calls on Argentina, while Schroders has started adding to its position. Fernando Grisales, a senior portfolio manager at Schroders, cites stabilizing poll numbers, a growing Central Bank reserve, and ongoing investment in Argentina’s oil sector as positive factors for the country’s long-term prospects.
Written by urgent.news from Buenos Aires Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
