Argentina’s international bonds dipped on Tuesday morning after the country’s Central Bank Governor Luis Caputo resigned after only three months in the position.
The sovereign issuer’s 2028s were spotted roughly 30bp wider through the morning’s trading at about 9.42% in yield terms, an investor said. The 10-year notes had contracted about 170bp between early September and September 21st.
Caputo’s resignation deals a further blow to Mauricio Macri’s government, which is working to restore investor confidence in the country following a prolonged currency crisis.
The Argentine peso opened about 2.3% lower on Tuesday to ARS38.15 against the dollar.
Caputo, who some investors consider the “engineer” of a $50bn credit agreement between Argentina and the IMF, resigned for personal reasons.
“This resignation is due to personal reasons, with the conviction that a new agreement with the IMF will reestablish confidence in the fiscal, financial, monetary and exchange rate situation,” the central bank said in a statement on Tuesday.
According to an investor familiar with the talks, Caputo and Treasury Minister Nicolas Dujovne had disagreed over how to manage Argentina’s monetary policy.
“I heard there was a misunderstanding with Dujovne,” the Argentine bondholder said. “Caputo is the engineer with the IMF and you want continuity with people behind the program.”
Reports have emerged in the last week saying Argentina could receive up to $20bn more through a bailout package from the IMF, prompting investors to pile back into the country’s bonds and repair some of the losses of recent months.
“Investors started going back, but some report that it is another $3bn to $5bn while others suggest it is $20bn,” a second investor said of an increased credit agreement with the IMF. “Yesterday [Monday] markets were disappointed because there is no controlling of the message from the government.”
Despite the drop in secondary trading, Argentina’s 2028s have still tightened roughly 150bp since the start of September. The peso has also rallied after being more than ARS40 against the dollar in August.
President Macri is in New York this week meeting with investment banks and investors alongside his commitments at the UN general assembly.
Caputo was named central bank governor in June. Economic Policy Secretary Guido Sandleris is expected to be named his replacement.
The IMF’s Chief Spokesperson Gerry Rice said on Tuesday afternoon that the fund looked forward to working with Argentina under Sandleris’ leadership.
“We take note of today’s announcements regarding the change at the Central Bank of Argentina. We look forward to continuing our close and constructive relationship with the BCRA under the leadership of Guido Sandleris,” Rice said in an emailed statement. “Our staff and the Argentine authorities continue to work intensively with the objective of concluding the staff level talks in very short order.”
Argentina turned to the IMF in May for a $50bn bailout package after concerns over increased interest rates in the US and its own inflation levels triggered the plunge in the peso. Argentina is negotiating a faster disbursement of the funds with the IMF.