Argentina bonds fall to $45 billion IMF deal snubbed

Argentines demonstrate in Buenos Aires against the government's agreement with the IMF
People take part in a protest against the government’s agreement with the International Monetary Fund (IMF) in Buenos Aires, Argentina, February 8, 2022. REUTERS/Miguel Lo Bianco

March 4, 2022

By Walter Bianchi and Rodrigo Campos

BUENOS AIRES/NEW YORK (Reuters) – Argentina’s government bonds tumbled about 2.3% on Friday, a day after the government signed a 45 billion staff deal with the International Monetary Fund.

The government and IMF on Thursday announced an agreement on a fund facility extended to 30 months, including a program to curb high inflation, reduce money printing to finance the budget deficit and provide positive real interest rates.

That deal, which requires Congressional and IMF Board approval, has already come under fire from some opposition lawmakers and some hard-left members of the ruling Peronist coalition, with doubts about its implementation.

“It’s not enough to solve Argentina’s problems,” said Buenos Aires-based Camilo Tiscornia of consulting firm C&T. “We’re going to have to honor the agreement, which isn’t going to be easy, so we’re going to have a very big challenge there.”

The tightly controlled peso currency slipped slightly on Friday despite gaining in popular alternative markets. The S&P Merval stock index fell more than 2.5%, while a sovereign risk index from JP Morgan Argentina rose.

Bonds, including 2046 and 2035 maturities, fell below 30 cents on the dollar, an area that despite the IMF breakthrough reflects investor fears about possible future defaults, although the broader global market context also didn’t help.

“The war in Ukraine took some of the air off the deal’s good news,” said one analyst.

Armando Armenta, New York-based senior economist for AllianceBernstein, said the deal had already been priced in after a pre-agreement was announced in January, but it nonetheless remained positive for the country.

“Yesterday’s announcement confirms our long-held belief that the Argentine authorities understand the dire consequences of defaulting on the IMF,” he said.

“We expect the deal to be ratified by Congress, albeit by a narrow margin, as radical members of the ruling coalition and opposition would seek to distance themselves from the deal.”

Congress is expected to begin reviewing and discussing the IMF agreement next week. It officially arrived in Congress on Friday.

Economy Secretary Martin Guzman told local radio on Friday the government hopes the bill will be approved before a $2.8 billion payment to the IMF is due on March 21, which would allow the country to meet it to pay for newly received funds.

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Argentina USD bond rates

Argentina USD bond prices (interactive chart)

Argentina: Economic Goals

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(Reporting by Jorge Otaola, Walter Bianchi and Rodrigo Campos; Writing by Adam Jourdan; Editing by Rosalba O’Brien and Jonathan Oatis) Argentina bonds fall to $45 billion IMF deal snubbed

Caroline Bleakley

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