In the rout that has hit Argentine markets since the end of April, the peso has shed a quarter of its dollar value and the country’s long-dated, dollar-denominated sovereign bonds, snapped up by investors when they were sold as recently as January, have slumped.
Is it now a good time to buy?
The $2.75bn landmark century bond, issued a year ago on Tuesday, was trading at 79.4 cents to the dollar on its first birthday. The country’s $3bn bond maturing in 2048, issued on January 11, was trading at 78.1 cents, delivering investors a negative total return this year of 18.8 per cent, according to Bloomberg.
Uday Patnaik, head of EM debt at Legal & General Investment Management, bought the 2048 bond on Monday at 78.43.
“There is definitely value being created in emerging markets,” he said. “It’s been a while since I could say that.”
With Monday’s purchase he has about a third of his target position in the 2048 issue. “We have been waiting for it to be sub-80,” he said. “If it gets to the high 76s we will buy a bit more.”
While still concerned about the impact of rising US yields and the strong dollar, he thinks Argentina, which this month arranged financing worth $50bn over three years from the International Monetary Fund, is now on the right path and that prices are overshooting on the way down.
Not so Paul Greer, EM debt portfolio manager at Fidelity International.
“We have no interest at this level,” he said. “[President Mauricio] Macri’s grand plan has been postponed. The government is in crisis mode and will be until the election in October next year.”
Like Mr Patnaik, he believes the driving force for EM assets is the duo of dollar strength and US yields. But he sees more to come.
“We think the sell-off is in its early stages,” he said. “It’s going to be a challenging summer.”
