​Failed peso-debt placement opens the question about whether to re-profile or monetize the AF20 bond

ARGENTINA - In Brief 11 Feb 2020 by Esteban Fernández Medrano

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As a new setback for the government's financing strategy, the Ministry of Economy reported late yesterday that the tender to reopen three peso bonds, to pay the upcoming amortization of the AF20 bond, has been declared void. This failure happened even though the three offered instruments covered the most relevant peso investment strategies (i.e. adjusted by inflation, market peso interest rate and dollar adjusted). In retrospective, the minimum betting prices (which were above that of the actual market prices) seemed to have been too high for the risk appetite of the market.- Bonos del Tesoro Nacional en Pesos con Ajuste por C.E.R. 1% Vto. 2021- Bonos del Tesoro Nacional en Pesos BADLAR Privada + 100 pbs. Vto. 2021- Bonos del Tesoro Nacional Vinculados al Dólar Estadounidense 4% Vto. 2021This debt placement intended to widen the scope of potential investors, after the failed attempt of last week to swap the AF20 bond, generating only a 10% support for an AR$ 105bn instrument, which amortizes this Thursday, February 13.What the National Government will need to define now is if it mimics the Province of Buenos Aires, which backtracked last week on its threat to default on its USD BP21 bond and paid it in full with its own resources, oR if Guzman announces a re-profiling of the AF20 bond.The choice is not easy. On the one hand the Government wants to maintain the peso debt market as unharmed as possible, from the upcoming USD debt restructuring process, to be able eventually to finance its fiscal deficit even if the USD debt market remains closed. However, on the other hand, the failed AF20 swap and yesterdays peso bond issuance indicates that the peso market is not acces...