Investors demand 7.9 percentage points more than U.S. Treasuries to own Argentina’s debt securities, according to data compiled by JPMorgan Chase & Co. The yield premium, which narrowed 0.02 percentage point at 10:15 a.m. in Buenos Aires, is the biggest in emerging markets after Venezuela and Ukraine.
Since a U.S. court order prevented Argentina from paying interest on its bonds by July 30 as Fernandez refused to pay defaulted bondholders at the same time, Argentine bonds lost 7.5 percent, compared with a 0.6 percent decline in emerging markets, according to JPMorgan.
Argentina hasn’t borrowed money in overseas markets since its record $95 billion default in 2001. Investors who held about 7 percent of the debt, known as holdout creditors, refused to swap their bonds at about 30 cents on the dollar for new securities in restructurings in 2005 and 2010. Settling the dispute with those holdouts would pave the way for Argentina to to borrow abroad again.
Borrowing Costs
“The country’s assets and property, whether it’s corporates, equity or real estate are under-held by investors globally,” Michael Roche, an emerging-market fixed-income strategist at Seaport Group LLC, said in a telephone interview. “The end of that legacy is approaching.”
Borrowing costs will probably contract to about 5 percentage points over U.S. Treasuries, Roche said.
Sergio Massa, an opposition lawmaker and former cabinet chief under Fernandez, had 26.8 percent support in a poll conducted by Raul Aragon & Asociados from Sept. 19 to 26. Buenos Aires Province Governor Daniel Scioli and Buenos Aires city mayor Mauricio Macri both had 23.6 percent. The poll of 3,001 people had a margin of error of 1.8 percentage points.
Argentina will hold presidential elections Oct. 25, 2015.
Peso Weakens
Since the default, the economy has worsened. The peso has weakened 16 percent in the black market, the government has restricted imports and industrial output contracted 2.9 percent in August. Central Bank President Juan Carlos Fabrega, who had carried out a devaluation and increased interest rates, resigned on Oct. 1.