BUENOS AIRES, Sept 21 (Reuters) - Argentine newly issued
international bonds are once more on the slide as investors
price in rising risks over the country's economic recovery and
much-needed market reforms following tightened capital controls
The new bonds, issued at the start of the month after a
largely successful $65 billion restructuring, have all dropped
since, ranging between 35-45 cents on the dollar on Monday, with
some of the Eurobonds falling sharply for the day.
Yields on the bonds have spread to around 13.5% from around
11% when they were first issued, traders said.
The weakness underscores investor concern over the South
American grains producer despite its revamping of foreign and
local debts, with focus recently on moves to tighten currency
controls and restrict already limited access to dollars.
The central bank limited personal and corporate access to
foreign currency last week in a bid to stem a dangerous decline
in reserves. That has seen many commercial banks halt dollar
sales entirely as they adapt to the new rules.
Morgan Stanley said net reserves were at "critical levels"
and while controls could slow the drain of reserves in the near
term, they created a "further deterioration in the business
environment, reducing the chances of a sustained recovery."
The bank added that a quick deal with the International
Monetary Fund for a new program, commitments to consolidate the
fiscal position and to ease capital controls could boost
investor sentiment and bond prices - though this was unlikely.
"(It's) the worst start to a restructured bond in 20 years,
with only Greece eventually ending lower," the investment bank
"Yet it has been difficult to catch falling Argentine bonds
in the past, so we take a more cautious approach. The positive
catalysts are lacking, with a high chance that policies turn
less market-friendly in the near term," it added.
A J.P. Morgan risk index, which fell after
Argentina's recent restructuring, rose 88 basis points on Monday
to 1,347. The Merval stock index declined.
Argentina's economy is expected to contract by more than
12% this year due to the impact of the coronavirus pandemic, and
analysts polled by Reuters predict a 20% slump in the second
quarter of 2020, for which data is due on Tuesday.
Economist Germán Fermo of consultancy MacroFinance said it
was a shock that just weeks after restructuring - and escaping
from the country's ninth sovereign default - Argentina's bonds
were back at almost default prices.
"Today we have a higher country risk than the Republic of
Congo and the newly released long-term bonds are discounted to
reflect 75% chance of another potential restructuring."
(Reporting by Walter Bianchi and Hernan Nessi; Writing by Adam
Jourdan; Editing by Dan Grebler and Cynthia Osterman)