Argentina Gains & Takes Profit Heavily

Argentine bonds ended a week full of heavy gains and heavy profit-taking, closing mixed Friday amid anticipation of a deal with the International Monetary Fund to resume Article IV reviews. Meanwhile, stocks hit a new 2009 high on the back of positive earnings sentiment for U.S. companies on Wall Street. Argentina's Merval Index jumped 0.92% to close at 2,169.04 points. Banco Macro (BMA, BMA.BA) led the charge among the Merval components, rising 4.29% to ARS9.97 ($2.60), while Tenaris (TS, TEN.MI) jumped 3.35% to ARS3.35. ($0.87). Bonds lacked direction Friday and trade was muted as investors hesitated to take a position ahead of the long weekend and the lack of clarity regarding agreement with the IMF, Research for Traders said in a market note. Markets will be closed Monday for the Columbus Day holiday. The benchmark peso-denominated bond slipped 0.05% in price terms to ARS100, to yield 12.11%. The dollar-denominated Boden 2012 added 0.48% in price terms to ARS314.50, to yield 12.92%. A deal with the IMF would be a key first step for Argentina to regain access to international credit markets shut since the 2001 sovereign-debt default. The country appears ready to allow the review of its economy and policies under the Article IV consultations, which are carried out regularly on every member of the IMF. Argentina needs to sign up to an economic program with the IMF if it wants to reschedule $6.7 billion in defaulted debt owed to the Paris Club group of nations. The country is also trying to settle the conflict with the holdouts who refused to accept terms of the 2005 swap and hold about $20 billion in defaulted bonds. Argentina's recent indication that it might seek to resolve outstanding debt issues and return to the international capital markets could eventually improve the outlook on its B3 government bond rating, Moody's Investors Service said Thursday. Argentina's government bond rating is one of the lowest of any country rated by Moody's due to the hangover from the default and unconventional economic policies. "While no single factor will, by itself, lead to an upgrade, resolution of these long-standing issues will go a long way towards reducing current credit concerns to the extent that they are reflective of an enduring effort to make policies more predictable," Moody's said. The apparent shift to more market-friendly policies has already fueled a sharp rebound in bonds. "There is still a great interest among savers in Argentine bonds, as demonstrated by the currency inflow to the country," Research for Traders said. "The medium-term sovereign bond outlook remains positive." The peso rose to 3.8300 to the dollar, from 3.8350. The dollar came under pressure all week as investors sought pesos to purchase government bonds.