June 26, 2019 | Cbonds
|We are pleased to announce that Cbonds is expanding the coverage of international markets. Domestic corporate bonds of Argentina have been added to the database. A total of 748 issues of the Argentine domestic corporate bonds are available at Cbonds website, with 349 issues outstanding. |
Bond Market Profile
The largest share of domestic corporate bond market of Argentina is represented by medium term debt instruments with the average maturity of 2.5 years. The unstable level of interest rates at the domestic market mainly explains the preference of issuers to place bonds with a fixed coupon rate – such instruments account for more than 60% of the total volume of the outstanding corporate securities. The most common reference rate used for bonds with a floating coupon rate (about 91% of the volume of this market segment) is BADLAR en pesos de bancos privados, the interest rate for deposits in Argentine pesos placed in the local commercial banks. The main borrowers at the corporate bond market are banks and energy companies (35.94% and 17.7% of the total market volume, respectively). The top three issuers of bonds are Pampa Energia (energy producer), Banco Galicia (bank) and YPF (oil and gas company).
One of the main features of the Argentine bond market is its special algorithm used for floating rate calculation. The peculiarity is that the coupon rate remains unknown throughout the coupon period and is determined only a few days until the end of this period. For the reference rate calculation, the arithmetic average of the benchmark for the period shifted by a certain number of days against the coupon period is used instead of the level of the benchmark on a certain date. It is a fairly common practice among the Argentine issuers to set minimum values for a coupon rate (minimum may be set both for the first coupon payments and for all coupons). An example of such issue is Banco Galicia, FRN 26apr2021, ARS (5.2).
Over the past few years, the Argentine authorities have introduced a number of reforms aimed at improving the efficiency of the national financial market. To increase the market liquidity and availability a united trading platform named Bolsas y Mercados Argentinos (BYMA) was created in 2017 as a result of merger of the Merval stock exchange and stock exchanges of Buenos Aires, Cordoba, Rosario, Bahia Blanca, La Plata and Mendoza cities.
In 2018, significant changes were made in the corporate governance sector. Firstly, the rule that allowed market regulators to remove board members of private companies the authority of the Argentine National Securities Commission to remove the members of the board of the public companies without a court decision was abolished. Secondly, the regulation depriving the foreign investors of the right to vote at shareholder meetings was rescinded. It is expected that these actions will help to boost the IPO market and to attract foreign investors.
In addition to reforms affecting the financial system as a whole, much attention is paid to the infrastructure and development of the national stock market. Argentinian market is special in terms of its system of assigning of trading codes to debt instruments. Each instrument is assigned three trading codes: the first code is used for transactions that are settled in the national currency, the second code – for transactions in US dollars with settlements via national bank accounts and the third one – for transactions in US dollars, the settlement of which are made via accounts in foreign banks.
The economy of Argentina is experiencing one of the deepest crises in its history. At year-end 2018, its gross domestic product (GDP) fell by 2.5%. The same year, Argentina registered the highest inflation rate for the last 27 years – 47.6%. Such high rates of price growth were mainly provoked by the government's decision to raise the target level of inflation for 2018 from 12% to 15%, which was a warning sign for the population and foreign investors. In addition, in 2018, Argentina became a country with the highest interest rates in the world. The value of the main indicative rate of the country Tasa de politica monetaria reached its historical maximum and amounted to 73.524% in August 2018 (in May 2019, this value hit a new high and amounted to 74.069%). Such record levels of the policy rate were set by the Central Bank of Argentina to stop the collapse of the national currency, which depreciated against the US dollar by 100% by year-end 2018.
In June 2018, the IMF approved financial support to Argentina in the amount of USD 50 bln under the Stand-By Arrangement. According to the IMF forecasts, if Argentina meets all conditions imposed by the granted loan, its citizens will recover their welfare level of 2017 by 2024.
Traditionally, daily quotes, bond calculator, basic parameters of placements, cash flow and issue documents are available for all the issues.
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