Argentine Bond Market

Argentine Dollar Bonds Fall After Ban on Saving in US Dollars

Argentina’s local law dollar bonds dropped the most in almost a month after the central bank barred individuals from buying U.S. currency for savings, deepening foreign-exchange restrictions

Bloomberg,

26 April, 2012

Government bonds due in 2015, known as Bodens, dropped 2.13 cents to 78.33 cents on the dollar at 6:26 p.m. Buenos Aires time, the most since June 11. The extra yield investors demand to own Argentine government bonds over U.S. Treasuries rose 18 basis points to 1,071 basis points, the biggest increase in JPMorgan Chase & Co.’s EMBIG index.

The new measure “generates fear that the government is increasing intervention in the economy,” said Daniel Chodos, an emerging-market strategist at Credit Suisse Group AG in New York. The selloff reflects “the consequences of this kind of news out of Argentina.”

Argentina’s central bank issued yesterday a list of acceptable reasons to justify foreign currency purchases, which doesn’t include savings. The bank said in an e-mailed statement all dollar purchases for any reason not on the list are “suspended.”

Morgan Stanley cut its forecast for Argentina’s economic growth today, estimating it will slow to 2.4 percent this year, down from a previous forecast of 3.1 percent. Tighter capital and import controls have weakened economic activity as inflation eroded the country’s competitiveness, Daniel Volberg, an economist at the firm in New York, wrote in a report.