Argentine bonds jump to three week record high

Argentine bonds jump to three week record high

07-18-2009 12:00

The Chilean Peso rose on the back of rising US housing starts which were boosted by copper prices; Chile’s main export product, while Argentine bonds climbed to a three-week record high. Santiago Lopez, an economist with Delphos Investments in Buenos Aires believes that traders speculate on a more cooperative administration to collect on outstanding debt with a total value of $20 billion, owned by bondholders who disapproved a reorganization plan in 2005. He also thinks that markets traded on the government being more lenient to restructure statistics agency Indec.

Housing starts

Chile’s currency climbed 1% from 532.45 yesterday to 537.83 a US Dollar, while it rose by 3% this week; the largest increase since week 25. The prices of copper compensated early declines due to the United States Department of Commerce announcing that housing starts increased 3.6% in June versus May, which is the largest rise since 2004. The COMEX division of the New York Mercantile Exchange (NYMEX) showed that September’s copper futures went up 1.4% to $2.423 per Pound.

Strongly increasing copper prices

“The Chilean Peso is rising on the back of strongly increasing copper prices, which also caused the US Dollar to drop versus the Euro,” commented Diego Echenique, a trader at LarrainVial SA, an investment banking and securities brokerage firm. Flavia Cattan-Naslausky, a RBS analyst stated that Banco Central de Chile could end its Dollar selling in the foreign exchange market if the Chilean Peso advances close to 500 a Dollar.

Return global investments

The central bank of Chile announced today that they sold US Dollars with a value of $40 million at an average valued price of 531.5 Pesos a US Dollar. The administration aims on selling $4 billion in shares of $40 million each on a daily basis in order to return global investments to Chile for economic stimulus spending.

Skipping the market

Flavia Cattan-Naslausky reported today: “Reaching 500 will be more difficult considering the possible trigger for a modification of the present foreign exchange policy, that would aim on skipping the market and selling US Dollars from the sovereign wealth fund straight to the Banco Central de Chile. The appreciation of Chile’s currency could be stopped and the tendency could even be turned around in case of a policy modification.” The return on Chilean 10-year Peso bonds in inflation-associated Unidades de Fomento (UF), a unit of account used in Chile, went up 0.08% reaching 2.88%.

More room to move

The return on the 5.83% Peso bonds expire date 2033, dropped 0.75% to 14.10%; the largest fall since June 29th. “The administration is capable to fulfill its debt obligations and if they can restructure Indec and come to an agreement with the bondholders, it will provide these bonds more room to move,” according to Lopez.