Economy

Argentine corporate bonds now at risk of default

8th October 2020

By The Essential Staff

Argentine corporate bonds now at risk of default

Taking on US dollar denominated debt in Argentina can always lead to big risks, especially when the peso is strong and the market looks happy to lend. But both the Argentine state and Argentine companies have continued to do this historically, and just like the nation ended up defaulting on some of its debt last year, some firms are now looking at risk of following suit.

</p> <img class="size-full wp-image-11007 aligncenter" src="https://gettheessential.com/wp-content/uploads/2020/10/corporate-bonds.png" alt="Corporate bonds are at higher risk of default with the latest Central Bank measures" width="693" height="501" srcset="https://gettheessential.com/wp-content/uploads/2020/10/corporate-bonds.png 693w, https://gettheessential.com/wp-content/uploads/2020/10/corporate-bonds-300x217.png 300w, https://gettheessential.com/wp-content/uploads/2020/10/corporate-bonds-600x434.png 600w" sizes="(max-width: 693px) 100vw, 693px" /> <p>The <a href="https://1816.com.ar/">graph</a> above shows the market value of corporate bonds from three publicly-traded Argentine companies: state-controlled hydrocarbons producer YPF, Pampa Energía and Banco Macro. After bouncing with the debt agreement reached by Economy Minister Martín Guzmán for Argentina&#8217;s public debt, the latest <a href="https://gettheessential.com/economy/2020/09/24/new-central-bank-restrictions-wont-halt-economic-crisis">Central Bank restrictions</a> to access the official currency market made prices plunge again, because investors fear <a href="https://gettheessential.com/economy/2020/09/30/the-insider-view-on-the-latest-central-bank-restrictions">private defaults</a> are now likely.</p> <p>Argentina&#8217;s official exchange rate is being de facto subsidized by the Central Bank through daily sales in the country&#8217;s FX market, and those who can&#8217;t get access to it need to utilize alternative rates which can be twice more expensive. Central Bank chief Miguel Pesce has been thinking about negotiating with companies for them to launch a debt renegotiating program similar to the one led by Guzmán at a national level, in order to ease the pressure on his coffers.</p> <p>

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The Essential Staff

The Essential is a premium subscription-based news platform that brings you high quality journalism and in-depth coverage in English about the changing face of Argentina’s politics and economy.