(Bloomberg) -- Argentina earned plaudits last year when it sold $2.75 billion of century bonds, a sign that Mauricio Macri’s administration had ushered in a new phase of financial dependability.
Fast-forward to today: The bonds have tumbled to a record low of 86.79 cents on the dollar as investors question the credibility of Argentina’s central bank and global emerging-market assets slide. The bank raised interest rates today for the second time in less than a week to stem the peso’s precipitous decline, a tactic that investors say will bring only temporary relief.
"Argentina, despite some significant reforms, is still left with a massive fiscal deficit and large imbalances in its external account," said Delphine Arrighi, a money manager at Old Mutual in London. "That leaves the currency under pressure and the government vulnerable to market sentiment given its large funding needs."
Treasury volatility and a dollar rally have hurt emerging-market assets during the past two weeks, leading stocks and local-currency bonds to erase this year’s gain and sending the spread on offshore notes to the highest in more than 14 months. The slump took yield on Argentina’s century bonds to 8.199 percent, the highest since they were sold in June at a 7.125 percent coupon.
"Argentina did not navigate well the latest bout of volatility and as investors tried to reduce positions the correction was more pronounced than in other countries," said Greg Saichin, chief investment officer for emerging-market bonds at Allianz (DE:ALVG) Global Investors in London.
(Updates second paragraph with interest-rate hike today.)