UPDATE 1-Argentine bonds gain after Peronists defeated in midterms

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(Restructuring with Bond Prices and Equity Markets)

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Buenos Aires/New York, Nov 15 (Businesshala) – Argentine bonds rose strongly on Monday after the ruling Peronists’ massive defeat in the midterm elections, with investors hoping the losses could force a change in more liberal policies as the government Arrives in the corridor. in Congress.

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Argentina’s over-the-counter bonds rose an average of 1.7%, led by ‘Bonner 30’. A benchmark 2035 sovereign bond, issued in a restructuring last year, rose about 0.75 cents to about 31 cents on the dollar.

The local S&P Merval Equity Index was meanwhile down as investors looked to take profits after the recent gains.

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Investors in Argentina generally see a glimmer of hope in the congressional vote, saying it could lead to a shift toward more conservative economic policies. Others worry that a crushed government could take an even more populist stance.

The conservative opposition won major swing congressional races across the country on Sunday, wiping out the Peronists’ Senate majority, which would force President Alberto Fernandez to work down the aisle to move through the new legislation.

“The most relevant result in our view is that the government bloc has lost a Senate majority,” Diego Pereira, chief economist at JP Morgan, Southern Conn, said in a note. He called it a “setback” for the more populist wing of the government led by Vice President Cristina Fernández de Kirchner.

The vote backed the result of an open primary election in September that sparked a major cabinet reshuffle and created a rift in the ruling party. President Fernandez voiced a conciliatory tone late Sunday and called for cross-party cooperation.

“The market is likely to have a net positive outlook regarding the election results,” Alberto Ramos, head of economics for Latin America at Goldman Sachs, said in a note.

Voters seem to have rejected the current policy mix and its consequences, he said, pointing to “declining economic and wage growth along with “very high inflation”.

“But there is also a risk of more populist near-term policies,” Ramos said.

Investors in the South American country generally view conservatives as more market-friendly and are wary of Fernández’s centre-left Peronist government and his powerful vice president.

“Calm down the markets”

Losing the election, on the other hand, could lead to further divisions within the ruling Peronist and possible power grabs by more hard-left factions affiliated with Fernández de Kirchner and more liberal voices such as economy minister Martin Guzmán.

But it also gives impetus to opposition, which investors can view as a positive ahead of the 2023 presidential election. And with sovereign bond prices stuck in troubled territory for months, after the 2020 debt restructuring, most of the risks are already settled.

“The value of bonds already reflects a state of great uncertainty, so I believe the outcome (prices) will not change much,” said Santiago Bullat, an economist at consulting firm Invec.

The local currency stock benchmark has hit a record high this year, most recently last Tuesday, as locals buy into stocks amid a weak currency and rising inflation eroding the value of their savings.

The official peso has lost 16% of its value this year in a controlled devaluation against the US dollar, but the unofficial exchange rate is almost twice the official rate. Annual inflation is running above 50%.

“The government should calm markets while communicating more systematic fiscal and monetary policy,” said Rodrigo lvarez, a Buenos Aires-based economist and financial advisor.

“Things need a plan to stabilize.”

Reporting by Jorge Otaola and Rodrigo Campos; Additional reporting by Mark Jones in London; Editing by Adam Jordan, Ana Nicolasi da Costa and Hugh Lawson

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