Reversal of Fortunes

Nov 1, 2011

Once seen as an improving credit story, Argentina is being punished in the secondary markets as investors fret about the sustainability of growth policies.

by Mariana Santibáñez

Sentiment toward Argentina is souring as investors question the sustainability of President Cristina Fernandez de Kirchner’s growth policies. The sovereign’s assets are already lagging high-beta peers, and analysts see spreads widening further in coming months if the government fails to take a different tack soon.

Ever since markets realized Kirchner would win a landslide victory in October’s presidential elections, investors have sent Argentina spreads ever wider amid fears that the government will dig in its heel over macroeconomic policies that they think are not working.

As of early November, the sovereign’s five-year CDS spreads were on an equal footing with Venezuela after being some 400 basis points inside its troubled high-beta peer just months earlier.

This marks an abrupt change in sentiment towards a country that was finally seen making amends with the international investor...

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