The High Risks & Rewards Of Argentine Bonds

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Argentine bonds offer yields up to thirty times greater than bonds in other South American countries. They have to in order to compensate investors for additional risk.

Far from the cozy credit confines of AAA ratings, Argentine bonds were the second-best performing investment in the country last year offering double-digit returns with long-term bonds like the Bonar X or the Global 2017 up 54% and the shorter-term Boden 2015 up 49%.

For a regional perspective, iProfesional offers Bonos Made In Argentina, a side-by-side comparison of Argentine bond yields compared to Brazil, Uruguay and other South American countries. While a 2015 bond in Argentina offers a 9.7% yield, a bond with the same time horizon offers significantly lower yields in Brazil (0.91%),  Uruguay (0.81%) or Peru (0.59%). 

The same holds true for South American bonds with a three-year time horizon. Argentina’s Bonar X 2017 offers a 10.7% yield which is off the charts compared to Southern Cone neighbors Brazil 2017 (1.55%) and Uruguay 2017 (2.25%).

Now two new Argentine bonds are joining the double-digit dance beginning with the Bonar 2024, the 10-year notes given to Spain’s Repsol earlier this month as compensation for the takeover of state oil and gas company YPF. Repsol in turn sold the bonds to JPMorgan. The notes were yielding 10.7% two weeks ago when Bloomberg implied JPMorgan was bullish on the outlook for Argentina

While the Bonar 2024 is emerging as the new reference point for Argentine bonds, Buenos Aires is adding its own double-digit issue to the mix. Today the Province of Buenos Aires announced its own 10-year bond issue which is being managed by BNP Paribas and Citigroup. The new provincial bond will offer a yield around 12% and a rating of Caa2. Speculative yet very attractive…that’s what we love about Buenos Aires. (Full Story in Spanish)

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