(Adds finance minister comments, new 2017 foreign currency debt
target, paragraphs 3-4)
By Luc Cohen and Dion Rabouin
BUENOS AIRES/NEW YORK, June 19 Argentina sold
$2.75 billion of a hotly demanded 100-year bond in U.S. dollars
on Monday, just over a year after emerging from its latest
default, according to the government.
The South American country received $9.75 billion in orders
for the bond, as investors eyed a yield of 7.9 percent in an
otherwise low yielding fixed income market where pension funds
need to lock in long-term returns.
Thanks to a stronger-than-expected peso currency, the
government has increased its overall 2017 foreign currency bond
issuance target to $12.75 billion from its previous plan of
issuing $10 billion in international bonds, Finance Minister
Luis Caputo told reporters in Buenos Aires.
Argentina is going to the international capital markets to
help finance a fiscal deficit of 4.2 percent of gross domestic
product this year. Caputo said Argentina has $2.6 billion in
bonds left to be issued this year. The new paper could be
denominated in euros, yen or Swiss francs.
The new bond had a coupon of 7.125 percent, the finance
ministry said in a statement that hailed success of the sale as
evidence that Argentina had regained "credibility and
Still, the move came as a surprise given Argentina only last
year ended a decade-long dispute with creditors over its 2002
default and residents tend to frown upon accumulating debt in
"Implicitly, this shows market confidence that the
government will be able to change the idiosyncrasy of the
country and will end the borrow and default cycles. Will it?"
said Edgardo Sternberg, Emerging Market debt portfolio manager
at Loomis Sayles.
BOND PRICES FALL
Argentine sovereign bond yield spreads over U.S. Treasuries
widened six basis points, the widest in a month at
412 basis points. Argentina's 2038 dollar bond
fell 1.5 cents while the 2046 bond issue fell
The 2032 par bond was down by 1.5 percent.
Though the bond appeared to be well oversubscribed, some
investors questioned the wisdom of investing for a such a long
term in a country as volatile as Argentina.
"It's awfully premature for Argentina to issue 100-year
bonds," said Jorge Piedrahita, chief executive officer of Puma
Investments. "When you look back in history, I'm not sure we can
find a 20-year period where Argentina has not defaulted."
Citigroup Inc and HSBC acted as lead book
runners on the deal, while Nomura Securities and Banco
Santander were co-managers.
Such long-term bonds are unusual, particularly in emerging
markets. Mexico issued a 100-year bond in 2010.
Since taking office in late 2015, President Mauricio Macri
has implemented several market-friendly reforms to deliver on
his promise of normalizing Argentina's economy after years of
heavy state intervention and non-payment of international debt
obligations under the previous government.
He ended a decade-long dispute with creditors that allowed
it to re-enter global credit markets, but Argentina lacks an
investment grade rating. S&P and Fitch rate the sovereign a B
with a stable outlook, while Moody's has the debt at B3.
The country sold 400 million Swiss francs ($410.64
million)in debt in March, and Caputo said on June 7 that
Argentina would issue peso and euro bonds later this month.
Many Argentines, with memories of the severe economic crisis
following a 2002 default, took to social media to express their
surprise, some with a touch of humor. One asked if Argentina
would exist in 100 years, and another said at least cockroaches
would pay off the debt.
Axel Kicillof, former finance minister who led negotiations
with holdouts under populist ex-President Cristina Fernandez,
accused Macri of saddling 10 generations of Argentines with
"They say nothing bad can last for 100 years. The legacy of
Macrismo shows it can," he wrote on Twitter.
($1 = 0.9741 Swiss francs)
(Reporting by Luc Cohen in Buenos Aires, Dion Rabouin New York
and Sujata Rao and Claire Milhench in London; Writing by
Caroline Stauffer and Hugh Bronstein; Editing by Cynthia
Osterman and Grant McCool)