Argentina returns to the bond market

Argentina makes its return to the international bond market for the first time since its default in 2001.

The sale of sovereign bonds marks the end of 15 years of exile, as a result of a $95bn default in 2001, and is the biggest emerging market sovereign sale this millennium (1).

Investors have welcomed the return of Argentina to the international bond market. The bond launch has been met with enthusiasm, attracting $65bn of orders, far exceeding the country’s $15bn fundraising target (2).

“Argentina is back,” said Finance Minister Alfonso Prat-Gay (1).

The bond sale follows high-profile negotiations with creditors who had refused the terms of a previous restructuring. Agreement was reached in February and $10.5bn of cash raised from the issue will be used to pay for the settlement (3).

Achieving resolution for the country’s debt default was one of the main campaign promises made by President Mauricio Macri, who came to power in December 2015 (2).

Predominantly, the funds raised will be used to bolster Argentina’s ailing economy. The International Monetary Fund’s Monetary and Financial Committee cited the bond sale as “a major step forward”, and praised Argentina for “putting the house in order”. The IMF forecasts that Argentina’s economy will contract by 1% this year; growth of 2.7% is forecast for 2017 (2).

The bonds will pay interest between 6.4% and 8% for notes of varying maturities between three and 30 years (3). Though still viewed as a speculative investment, credit rating agency Moody’s has raised Argentina’s sovereign rating to B3 with a stable outlook (4), after permission was granted by a U.S. court for the South American Country to resume servicing its debts (5).