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ECONOMY | 17-05-2021 19:17

Argentina's bonds climb as Fernández backs swift deal with IMF

Argentina's dollar bonds rose on Monday after President Alberto Fernández said he wants reach an agreement with the International Monetary Fund as quickly as possible.

Argentina's dollar bonds rose on Monday after President Alberto Fernández said over the weekend that he will seek to reach an agreement with the International Monetary Fund as quickly as possible.

Argentine bonds due in 2035 rose 0.8 cents to 32.6 cents on the dollar, their highest level since February 22. Since their restructuring last year, Argentine bonds have traded in distressed territory, with investors criticising the government’s lack of decisive measures to control inflation and revive the economy.

The change in sentiment would be a sign that Argentina is taking steps to secure a deal with the international lender after the midterm elections in October. But the president's comments also suggest that internal divisions in his left-wing Peronist Frente de Todos coalition could deepen before the vote, according to Edwin Gutiérrez, a portfolio manager at Aberdeen Asset Management in London.

"I still don't expect an agreement before the midterm elections, but I think negotiations for it to be signed will get under way fairly quickly after that," Gutiérrez said. “Even Cristina Fernández [de Kirchner] would like an agreement with the IMF. It's just not going to say anything remotely favourable about those previous elections. "

In March, Vice-President Cristina Fernández de Kirchner called the IMF negotiating terms "unacceptable" and said the country would not be able to pay the US US$45 billion it owes to the international lender.

Earlier this month, Fernández and Economy Minister Martín Guzmán met with a host of European leaders with the intention of gaining support to delay a payment of US$2.4 billion to the Paris Club, a group of wealthy creditor countries. Reports suggest the Paris Club would be willing to delay that payment, if Argentina meets certain conditions.

"Fernández is giving the Paris Club the peace of mind they need to allow the loan to be deferred," said Siobhan Morden, director of fixed income for Latin America at Amherst Pierpont Securities in New York. "But there is no context for the IMF deal before the elections, and negotiations after that will remain difficult."

In addition to the Paris Club payment, Argentina this year faces US$4.8 billion in principal and interest payments to the IMF.

by Scott Squires, Bloomberg

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