By Ben Bain and Camila Russ for Bloomberg.comForecasts that the Argentine peso will depreciate less than analysts initially predicted are fueling bets that the country’s local debt will outperform dollar-denominated bonds for a third year in 2011.
President Cristina Fernandez de Kirchner will weaken the peso this year by 8 percent to 4.30 per dollar, according to the median estimate of economists surveyed by Bloomberg. In June, analysts projected the peso would decline 11 percent from their 2010 year-end forecasts.
A smaller currency drop helps preserve dollar-based gains on inflation-linked peso debt, which returned 293 percent since the start of 2009, compared with 97 percent for similar notes from Brazil and 216 percent for Argentine dollar bonds, according to JPMorgan Chase & Co. and Barclays Capital. Fernandez will avoid a “dramatic” peso depreciation before presidential elections in October, said Bret Rosen, a Latin America debt strategist at Standard Chartered Bank in New York.
“We’ve seen a good rally in Argentina, and given the tightening in spreads for dollar bonds, I think there’s more opportunity looking ahead in local bonds in pesos, where you have higher yields,” said Alejandro Urbina, an emerging-market debt manager in Chicago at Silva Capital Management, which has $800 million under advisory and management, including peso debt.
Argentina grew 8.5 percent last year, analysts estimate, the most among Latin American countries for which Bloomberg has forecasts. The peso slid.. Read full artricle
