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Argentina likely to find strong demand for bond sale -investors
January 18, 2017 / 6:03 PM / 10 months ago

Argentina likely to find strong demand for bond sale -investors

Jan 18 (Reuters) - Argentina’s planned bond sale on Thursday could be several times oversubscribed due to confidence in the government’s ability to control inflation and spur economic growth, said investors who attended the country’s roadshow presentations this week.

Latin America’s third-largest economy plans to sell between $3-5 billion in dollar bonds on the international market, the government said last week. The country also reached a $6 billion repo deal with the six banks acting as bookrunners for the sale.

Argentina will aim to sell a five-year bond with an initial yield target set in the high 5 percent range and a 10-year with an initial yield target in the low 7 percent range, Thomson Reuters publication IFR reported on Wednesday.

The government will probably encounter interest for far more debt than it is aiming to sell this week, investors said, even though economic growth remains elusive more than a year into President Mauricio Macri’s term.

Investors were also encouraged by the relatively small dollar amount and short maturities.

“Both of these are positive, and I think that investor demand will be strong for the new debt,” said Allianz Global Investors emerging markets portfolio manager Shahzad Hasan, who attended Argentina’s roadshow presentation in London on Monday.

Shortly after taking office in December 2015, Macri ended a longstanding legal battle with holdout creditors, paving the way for Argentina to exit default and return to global capital markets after a 15-year absence. It sold $16.5 billion in debt in April despite receiving offers worth $68.6 billion.

This year, Argentina expects to tap global markets for $10 billion to help meet financing and refinancing needs of about $40 billion, Finance Minister Luis Caputo told reporters last week.

Getting a large portion of international issuance out of the way early in the year will be positive for Argentina, said Aberdeen Asset Management portfolio manager Kevin Daly. Still, potential investors raised concerns about the country’s fiscal deficit, seen at 4.2 percent of gross domestic product in 2016.

“Inflation is declining, and all these positive actions could help contribute to higher investment and growth,” said M&G Emerging Markets Bond Fund Manager Claudia Calich, citing Macri’s market-friendly reforms such as lifting currency controls. “The part that is still lagging, partly as growth hasn’t fully recovered yet, is the fiscal side.” (Reporting by Karin Strohecker, Claire Milhench and Marc Jones in London; Writing by Luc Cohen in Buenos Aires; Editing by Lisa Von Ahn)

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