Almost exactly a year ago, investors were lined up for a piece of Argentina’s century bond offering. Couldn’t get enough of the stuff, of which there was simply not enough to go around. One hundred years with a 7.9% coupon from a country that defaults on average every 16 years or so? Sign me up.
In January, Argentina sold some five-year notes paying 4.625%, in addition to some 10- and 30-year maturities. Investors wanted more than $20 billion worth, but, alas, Argentina was selling just $9 billion.
Tomorrow, Argentina will try to roll over $19 billion in short-term debt. The Central Bank is offering an interest rate nearly 10 times what it gave five months ago. Opportunity of a lifetime? A chance to get those bonds you couldn’t in January, and double your money in two-and-a-half years to boot? Not exactly.
If investors don’t flock to the country’s offering, it would mean that even with interest rates at 40%, there isn’t enough confidence in the peso to lure investors into the embattled currency.
You think things can’t get any worse, amidst a continuing plunge in the peso and the resignation of central bank president Federico Sturzenegger? Consider that on Wednesday, Argentina could be left holding a whole pile of unsold bonds facing a bond market with even less appetite for them than before.
Index provider MSCI Inc. will decide whether to add Argentine stocks to its widely-followed emerging markets index…. Inclusion in the index could draw billions of dollars in passive investment into Argentina’s stock market at a time of vulnerability. Morgan Stanley estimates the MSCI move could boost Argentine share prices by 20% over the next four months, based on $4 billion in fresh inflows. But if MSCI excludes the country from its emerging markets index, that could trigger another 6% decline in the market, the bank said.
Think it still can’t get worse? Well, we’ll just have to wait and see what Cristina Kirchner does on Thursday.