New Inflation Index May Boost Argentine Bonds

Argentina may be close to launching a new CPI that complies with international standards, according to BBVA. While that will not fix the distortions that come from price controls and government intervention in several industries, it could reintroduce the CPI as an effective tool in forecasting inflation. If the new measure complies with international standards, investor confidence would get a boost, increasing demand for Cer inflation indexed bonds. The shop examines the performance of six Argentine inflation linked bonds, the Pre 8, Pr 12, Bogar 18, Boden 14, Discount and Par bonds, and notes the yield differential between the Bogar 18 and Discs tightened following the CPI announcement Monday. Most economists following Argentina are skeptical of the official numbers as reported by INDEC, the economic statistics bureau, and have devised their own method to establish inflation. The rate is more than double what the government reports, at around 20%, say analysts.