Staying with the Argentina theme, it seems that investors are no longer as concerned about a technical event of default. Argentina CDS continues to tighten.
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| Source: DB |
Moreover, investors are looking beyond this legal battle toward a potential changing of the guard in Argentina. Demand for Argentina bonds has been quite strong lately.
Bloomberg: – The country’s dollar bonds have returned 46 percent over the last year on bets a more market-friendly government will replace President Cristina Fernandez de Kirchner when her term ends in 2015 and as she moves to improve relations with international community.
Argentina’s law says that by the end of 2015 Fernández de Kirchner will no longer be President, as she finishes her second consecutive mandate. And many hope that some of her populist policies (see discussion) will go as well. The present economic situation – with inflation rate estimated at over 30% and expected to go higher later this year – is simply not sustainable (note that Argentine authorities have not released the latest inflation results as required by the IMF). The current adminisration in Argentina is fully responsible for getting the country into this mess. It is time for them to go.
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| Argentina YoY inflation rate (source: Barclays Research) |
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