Argentina bonds sink after currency controls brought back

3 Sep 19

Argentina’s international bonds have fallen to record lows following the reintroduction of currency controls in the South American country. 

The government’s u-turn means that it will restrict purchases of dollars and other foreign currencies in an attempt “maintain currency stability”, the country’s central bank said.

The move, which aims to prop up the peso, is at odds with president Mauricio Macri’s anti-interventionist, free trade inclinations.

Currency controls were last put in place in Argentina by Macri’s anti-investor predecessor, Cristina Fernández de Kirchner.

Today the country’s bonds fell to a value of 38 cents per dollar, compared to 81 cents on August 9.

Individual Argentineans are able to buy up to $10,000 US dollars a month but must seek permission to buy more than that.

Michael Bolliger, head of asset allocation for emerging markets at UBS Wealth Management, said: “(Capital controls are) a sign of distress in the market and reflect that the new parameters on Argentina are weak and when the peso weakens further it weighs on the credit profile.

“There remains a lot of pressure on the currency. There’s a limit to what they can do without capital controls.”

Its falling bond values come after finance minister Hernán Lacunza asked to restructure its debt arrangement with IMF, giving it more time to pay back the fund’s biggest ever bailout.

Gerry Rice, chief spokesperson of the IMF, said: “Regarding the debt operation announced by the Argentine authorities…fund staff [are] in the the process of analysing them and assessing their impact. Staff understand that the authorities have taken these important steps to address liquidity needs and safeguard reserves.

“Staff will remain in close contact with the authorities in the period ahead and the fund will continue to stand with Argentina during these challenging times.”

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