Is Argentina next? Is Argentina next? Is Argentina next?

Is Argentina next?

Althea Spinozzi

Head of Fixed Income Strategy

Markets appear inclined to see the Turkish situation as no different from other episodes of weakness seen in recent years, and as something that will probably not have a contagion effect on other emerging markets. I struggle to hold this line, and find it difficult to believe that this is just an isolated case and that things will soon return to normal.

It is my view that EM risks are now significantly higher than before, and that we should be concerned about other countries in the EM space that are struggling from major devaluations of their local currencies and remain highly dependent on foreign investments.

This is why we should take a closer look at Argentina, where several government bond issuances this week fell flat on their faces, increasing refinancing risks even in light of the International Monetary Fund's recent bailout loan.

At the moment, Argentina is mainly dependent on short-term debt; for this reason, it is now trying to phase out short maturities and to commit investors to longer-dated government bonds. This week, 530bn pesos of LEBACS matured and the government wanted to give investors the opportunity to roll over their positions in the short term with an auction of 230bn pesos in LEBACs (35-day at 45.04% and 98-day at 42.75%), while the remainder should have gone to longer maturities (LETES).

Both auctions, however, flopped. On Tuesday, the government was able to place only 202bn of the 230bn pesos offered in LEBACS. On Wednesday, the LETES auction (105 days at 42.23% and seven months at 39.8%) led to the placement of only about 23bn pesos rather than the 40bn Buenos Aires had hoped to place.

As investors fled to USD, the central bank pushed up its minimum reserve requirement on big banks by 3% yesterday in an effort to support its currency.

Refinancing of short-term maturities is clearly becoming a problem, and the central bank’s plan to eliminate LEBACS by the end of this year clearly poses a great risk at a very delicate time, with EM sentiment significantly depressed.

Until EM sentiment rebounds, LEBACS could be the only source of financing Argentina is able to obtain.

As you can see from the graph below, the total outstanding amount of LEBACs has decreased sharply this week, but this doesn’t fall in line with the central bank's plan to gradually phase out these maturities. Investors have lost their appetite for Argentinian bonds, and thus are unwilling to be pushed towards longer-dated Argentinian debt.

While Argentina’s USD-denominated bonds have been more resilient than their ARS counterparts, they are also down considerably since the beginning of this year. The 10-year, USD-denominated Argentine international government bond issued this January with a yield of 6% is now down 20 points since issuance and offers 350 basis points more in yield. 

The centenary Argentinian bond maturing in 2117 has shrugged off 15 points since issuance and we can expect more volatility as things develop, although the shorter part of the curve will be the most vulnerable.

With the Argentinian pesos down 37% since the beginning of the year, pressure is clearly building up. At this point, the real question is how long investors can find comfort in the IMF’s $50bn bailout?

LEBAC total amount outstanding
LEBAC (total amount outstanding, source: Bloomberg)


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.