Panic On The Pampas! Argentina Short-term Bonds Post Higher Yields Than Century Bonds (Rising Contagion Risk!)

Things are a mess in emerging markets. There is rising contagion risk, the highest since 2008/2009.


As an example of emerging market troubles, I give you Argentina. A nation so desperate to borrow that they have issued Century bonds (100 year maturity).

(Bloomberg) — Argentine President Mauricio Macri’s pledge to close the fiscal deficit by next year wasn’t enough to lift the peso and bonds today. In the case of bonds, and especially in shorter maturities, the selloff may be starting to look overdone. That’s less clear for the peso.

The plan announced by Macri on Monday should put bondholders at ease since all financing needs are covered if everything goes according to plan, meaning there’s no primary deficit and the government can rollover and sell all the debt in the program. Maybe that’s a big if for some investors and it’s why yields on 2019 debt shot up to 10.8%, higher than the nation’s century bond.


That is a steeply downward sloping yield curve (although not a bad a Venezuela).


And the Argentinian Peso has been demolished.


Macri is not as photogenic as Venezuela’s Maduro, so I will show a Peron-era Socialism poster instead (which is the source of Argentina’s and Venezuela’s problems).


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