Argentina weighs bond sales in Swiss francs, euros and yen

Argentina weighs bond sales in Swiss francs, euros and yen

Argentina Bonds

Argentina will tap into other currencies to round out the $2.5bn it requires to meet its external funding needs for the year, Finance Minister Luis Caputo said.

The sovereign issuer is focusing on refinancing debt and Caputo told journalists in New York that Argentina could look to more Swiss francs, euros or yen.

Argentina also plans to raise $6.5bn in the local capital markets in either pesos or dollars, he said.

The country covered roughly 70% of its fundraising needs in Q1 this year, which has limited its exposure to global risks, such as the presidential election in France or higher interest rates in the US, according to Caputo.

"We have a spread that has narrowed, based on what we have achieved on the economic side, not what happens in the rest of the world," he said. "As long as we do that – narrow our spread – we can compensate for any higher interest rates."

Argentina sold CHF400m ($401m) in 3.5-year notes in March at 383bp over mid-swaps, or 55bp below the CHF300m in bonds that the state-owned oil company YPF issued in September last year.

Since the sovereign returned to the market in April last year, a number of provinces also raised billions of dollars in cross-border bonds. Neuquen is next in line with a possible $366m bond issue and Santa Cruz plans to sell some $350m new notes later this year.

Caputo said the provinces ask the central government if and when they can issue cross-border bonds so there is not an overlap of sovereign and sub-sovereign debt in the market. But opening the market last had less to do with fundraising for the public sector and more to do with the private sector.

"There is definitely a lot of appetite for corporate issues. I spoke to two investors who said just that," Caputo said.

Among Argentina's corporate issuers, Pampa Energia went back to the cross-border bond market in January, raising $750m from the sale of 10-year notes at 7.5%, while Genneia sold $350m in five-year paper to yield 8.75%.

The administration of President Mauricio Macri has drafted legislation to Congress to reform the local capital markets and Congress could pass the bill before the end of the year, Caputo said. Proposed reforms include lifting restrictions on mutual funds and foreign investments in the domestic market.

Credit to private sector borrowers equals roughly 15% of GDP in Argentina, Caputo said, compared to 66.8% in Brazil and 111% in Chile.

"We need to make the local capital markets grow as much as possible. Our capital markets are probably a third of the size of the rest of Latin America," he said. But retail investors are starting to buy local treasury notes, or letes, in dollars, he added.