Argentine Bonds Rise as Nisman Death Fuels Opposition – Businessweek

Posted: Thursday, January 22, 2015

The growing political damage to President
Cristina Fernandez de Kirchner following an Argentine
prosecutor’s mysterious death is bolstering speculation that an
opposition candidate will win this year’s presidential election,
fueling gains in the country’s bonds.

A poll today showed Fernandez’s image will probably suffer
after she initially suggested the death was a suicide, then
changed her story to say that he was murdered as part of a plot
to soil her administration’s reputation. Argentine bonds due
2024 have climbed 2 cents on the dollar to a six-month high of
99.49 cents over the past four days as the scandal unfolded, and
they’re heading for the biggest increase in 10 weeks.

“The bonds have been performing well largely on the
premise that this scandal further constrains an unpopular
administration and its ability to influence the presidential
race,” said Patrick Esteruelas, a senior analyst at Emso, a
money manager specializing in emerging markets with $2 billion
under management.

Even after Argentina defaulted last year on its foreign-law
bonds, many investors have bought the country’s debt on a bet
that a new government will improve policies once Fernandez steps
down at the end of her last term in December. The country’s
economy probably contracted by 1.5 percent last year, based on
estimates of analysts surveyed by Bloomberg, and the official
inflation rate was 24 percent.

Macri’s Gain

The extra yield investors demand to own Argentine bonds
instead of U.S. Treasuries has narrowed 0.20 percentage point to
7.1 percentage points over the past four days. By contrast,
average spreads across all emerging markets compressed 4 basis
points during the period, according to JPMorgan Chase & Co.

The prosecutor, Alberto Nisman, was found dead on Jan. 18
in his apartment the day before he was scheduled to present
evidence that Fernandez tried to cover up Iran’s role in a 1994
bombing that killed 85 people.

Thousands rallied Jan. 19 throughout the country and in
front of the presidential palace demanding justice and an end to
corruption.

In a poll published today by Cronista.com, 63 percent of
respondents said Fernandez’s image would suffer a “big impact”
and 21 percent said that it would be “somewhat” affected. The
news website didn’t give a number of people questioned or the
margin of error. The presidential election is scheduled for Oct.
25.

Buenos Aires province governor Daniel Scioli, the leading
candidate who’s most closely aligned with Fernandez, probably
will lose support amid a probe into the death, Esteruelas said
in a telephone interview.

Buenos Aires city Mayor Mauricio Macri, another candidate
who has said he wants Argentina to regain international market
access, will benefit most from the scandal, Esteruelas said.

“Aside from this obviously being a very tragic event,
there are some potential implications, including the potential
that Fernandez and her allies, including Scioli, are damaged
politically,” Marco Santamaria, a money manager at
AllianceBernstein LP, said by e-mail. “From an investor
perspective, a weakened Scioli can be interpreted as good
news.”

(An earlier version of this story contained an inaccurate
spelling of Nisman’s last name.)

To contact the reporter on this story:
Camila Russo in Buenos Aires at
crusso15@bloomberg.net

To contact the editors responsible for this story:
Brendan Walsh at
bwalsh8@bloomberg.net
Bradley Keoun, Daniel Cancel

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