Argentina Bonds Off On Lack Of IMF Deal, Emerging Mkt Decline

 
   By Shane Romig 
   Of DOW JONES NEWSWIRES 
 

BUENOS AIRES (Dow Jones)--Argentine bonds pulled back Wednesday amid a general dip in emerging-market debt and news that an agreement between the government and the International Monetary Fund to conduct an Article IV review isn't a done deal.

The benchmark peso-denominated bond fell 3.52% in price terms to ARS98.65 ($25.72), to yield 12.26%. The dollar-denominated Boden 2012 fell 1.34% in price terms to ARS314.71, to yield 13.2%.

Emerging-market bonds came under pressure due to a decline in crude-oil futures, a rally in U.S. Treasurys and a rebound in the dollar that signaled diminished appetite for riskier assets.

In addition, although Argentina will continue talks with the IMF to resume annual Article IV reviews, a deal has yet to be reached, Economy Minister Amado Boudou said Wednesday.

"It's not decided whether it will happen or not, first of all, and second of all, how it will be," Boudou told local news channel C5N.

Boudou met with IMF Managing Director Dominique Strauss-Kahn in Istanbul on Tuesday, fueling speculation that an agreement with the IMF was imminent. The two plan to meet again during the first week of November.

The specter of a deal fueled a rally in Argentine bonds, as it would be an important first step for the country to return to international lending markets.

With Argentina eager to regain access to international credit markets shut since the 2001 sovereign-debt default, the country appears ready to allow the review of its economy and policies under the Article IV consultations, which are carried out regularly on every member of the IMF.

Argentina needs to sign up to an economic program with the IMF if it wants to reschedule $6.7 billion in defaulted debt owed to the Paris Club group of nations.

Argentina is also trying to settle the conflict with the holdouts who refused to accept terms of the 2005 swap.

The market-friendly moves have spurred steep gains in Argentine bonds in recent weeks, but some still see a continued upside.

"Argentina remains cheap in relation to both other emerging market countries or global corporate bonds. However, the upside potential has been reduced substantially due to its stellar outperformance," research firm TPCG said in a report Wednesday.

"If the Government does not disappoint investors, then global factors will continue to support the rally of Argentinean bonds," TPCG said, recommending positions in the Bogar18, Boden12, Bonde15 and euro-denominated bonds.

However, Delphos Investment was a bit more cautions. "To keep rising, local bonds need an improvement in worldwide emerging market debt appetite...or a change in investor's perceptions of the Argentine government," Delphos said.

Meanwhile, stocks were dragged down by weakness on Wall Street.

Argentina's Merval Index shed 0.17% to close at 2,097.65 points.

The peso close unchanged at 3.8350 to the dollar.

-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com

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(END) Dow Jones Newswires

October 07, 2009 17:12 ET (21:12 GMT)


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