South America

Trading Argentine bonds has become a test of endurance as the prospect of a possible default triggers wild price swings and volume dries up, Bloomberg News reported. The Liquidity Assessment Scale of 1 to 100 (100 being the most liquid) slumped to 12 on Wednesday for the South American nation’s bonds from 68 just three weeks ago. “There is a lot of hysteria in the market and it is causing a lot of uncertainty on valuations,” said Jason Devito, a Pittsburg-based money manager at Federated Investment Mgmt Co., which has $502 billion under management.

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A Brazilian judge on Wednesday ruled that Imcopa, one of the country’s largest processors of non-genetically modified soybeans, will no longer be able to enforce early termination of a lease agreement related to two soy crushing plants, Reuters reported. Imcopa has been going through a bankruptcy reorganization since 2014 and wants to sell the plants to pay back creditors. Last week, Imcopa terminated a 10-year lease on the two plants with brewer Cervejaria Petropolis SA, prompting the beer maker to seek legal remedies.

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Less than two years after Argentina made a splash in markets by selling a $2.75 billion, 100-year bond, another debt restructuring is a real possibility after President Mauricio Macri was routed in a primary election, Bloomberg News reported. Money managers and analysts from firms including Citigroup Inc. and Bank of America Corp. say investors are likely to recoup less than 40 cents on the dollar on its notes if Argentina reneges on its debt for the third time in two decades.

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The cost of insuring against an Argentine sovereign default climbed on Tuesday as Hernan Lacunza was sworn in as the new treasury minister of the crisis-hit country, Reuters reported. Argentine 5-year credit default swaps (CDS) were quoted by IHS Markit at 2,990 basis points (bps), up 77 bps from Monday’s closing level of 2,913 bps. Markit calculations, based on Monday’s closing prices, estimate a 82% probability of a sovereign default within the next five years.

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Shares in Brazilian telecoms carrier Oi SA posted heavy losses on Tuesday, after media reports that its largest shareholder, GoldenTree Asset Management, is seeking to replace Oi’s Chief Executive Officer Eurico Teles, Reuters reported. Brazilian newspaper O Estado de S. Paulo reported earlier on Tuesday that GoldenTree, which holds a 14.5% stake in the company, sent a letter to the board saying Oi needs a CEO “that may execute the operational restructuring recently proposed,” the paper said, mentioning the letter was dated Aug. 16.

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The slump in the Argentine peso last week made the country’s pile of debt much harder to repay, signaling a renegotiation may again be in the cards for the South American nation, Bloomberg News reported. As of March 31, Argentina had $33.7 billion in foreign-currency debt payments due by year-end, the majority in short-term Treasury bills, or Letes, according to the latest debt report by the Finance Ministry. Most of that still needs to be repaid.

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After a brief respite at the end of last week, Argentina’s debt is getting hammered again. The nation’s offshore notes approached new lows on Monday, close to wiping out the small rebound from late last week, after the country was downgraded deeper into junk territory by two of the three biggest ratings companies and the Economy Minister Nicolas Dujovne resigned, Bloomberg News reported. The extra yield investors demand to own Argentine bonds over U.S.

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Fitch Ratings has downgraded Argentina, citing concerns about the country’s capacity to repay its debt following a collapse in the peso triggered by the surprise victory of Peronist Alberto Fernández over incumbent president Mauricio Macri in recent primary elections, the Financial Times reported. The rating agency slashed Argentina’s rating to CCC and warned the country could lose market access should Mr Fernandez move sharply away from the policy path set forth by the current administration.

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The Argentine opposition candidate, Alberto Fernandez, said that the country would struggle under present conditions to repay a loan to the International Monetary Fund and he would seek to renegotiate the repayment terms, according to an interview published on Sunday by the newspaper Clarin, Reuters reported. “I would say that there is only one incontrovertible reality and that is that Argentina in these conditions is not able to repay the debts it took on,” said Fernandez, the favorite to win the October elections.

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