Demand for Argentina’s bond sale is expected to top $20bn as investors bet President Mauricio Macri’s policies can reignite growth in South America’s second-biggest economy, according to a debt capital markets banker familiar with the transaction.
Argentina is looking to sell $5bn in five- and 10-year bonds on Thursday. Final guidance was set at 5.625% for the 2022s and 6.875% for the 2027s. By Wednesday evening, order books had reached $14bn, several bankers said.
The sovereign has the option to print up to $7bn in new bonds, but sources involved agreed that it would be more prudent to cap the bond sale at $5bn. A second source said issuing $7bn now would eliminate any need to return to the market later this year and avoid potential market volatility.
“Market conditions are not going to get much better than this, so why not?” he said. “Starting tomorrow [January 20] we are still unsure how the markets will react once Trump is in power.”
A weak start in the US Treasuries dampened early optimism for Argentina’s trade, but the high level of demand won’t slow the sovereign down, a source in New York said.
“Treasuries were down this morning and that affected pricing,” he said. “But we are confident they will issue $7bn.”
The issue marks Argentina’s first international bond sale of 2017 and follows cross-border deals this week by Chile, Colombia and the Dominican Republic.
The Argentine economy has struggled to rebound from a recession, but investors are expected to show intense interest in the country’s debt. Argentina’s decision to issue a smaller amount of debt with shorter maturities has helped drive investor appetite, some investors said.
Anthony Simond, an investment manager at Aberdeen Asset Management in London, said bond buyers had initially expected a larger issue from Argentina. However, Argentine officials last week announced a deal to borrow $6bn from six international banks, significantly reducing the country’s needs to tap the cross-border bond markets this year. Under the deal, BBVA, Citi, Deutsche Bank, HSBC, JPMorgan and Santander will each lend $1bn to Argentina.
“The market was expecting a lot this year,” Simond said, referring to the amount of Argentine debt. “But they have come out and said they will issue a maximum of $7bn.”
Argentina’s 7.5% 2026 bonds, which were issued in April of last year as part of a $16.5bn four-tranche deal, offered a yield of 6.7% on Wednesday, while the country’s 2021 notes were seen at 5.3%.
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