That 100-Year Argentine Bond Not Looking So Great Now

Paul Singer would be happy to take it off your hands for a few cents on the dollar, though.
Presidencia de la Nación Argentina [CC BY 2.0], via Wikimedia Commons

Ready to fix this! Presidencia de la Nación Argentina [CC BY 2.0], via Wikimedia Commons

About this time last year, Argentina was celebrating its return to fiscal responsibility and the international debt markets with a 100-year bond offering. And why not? It had been a whole three years since the country’s most recent default, its sixth in, well, 100 years. Investors could not get enough of the stuff. After all, Argentina’s new president was a businessman like them and saying all the right things, and they only needed the country to pay its bills for 12 years to make money on the century bonds. What could go wrong?

Well, in a word, Argentina. Argentina could go wrong.

Argentina was on course to run a large fiscal deficit this year, and Argentina owes a large amount of its debt in U.S. dollars, which are becoming very expensive. Negotiations for an Argentine rescue from the International Monetary Fund are picking up, with the IMF’s board expected on Friday to formally deputize the IMF’s staff to negotiate the details of the rescue…. “The reality is this bailout, as things are dragging on, is getting more expensive,” Mr. Brooks said….

In exchange for the lending, the expectation is that the country will take meaningful steps to get out of the situation. With so much of Argentina’s challenge driven by large and persistent deficits, a big focus of the negotiations is likely to be a set of targets, agreed upon by the IMF and Argentina’s President Mauricio Macri, to reduce those deficits to specific levels.

And things could yet get so much worse. Macri is up for reelection next year amidst the disaster, and there’s a certain someone who thinks she could be solidifying her Nobel Prize.

And chaser:

Argentina’s Economy Is Near Crisis. Will a Bailout Be Big Enough, Fast Enough? [WSJ]