Yield-desperate investors stop before nothing. What have central banks wrought? Junk-rated, deficit-plagued, inflation-whacked Argentina just sold $2.75 billion of 100-year dollar-denominated bonds. This was the first time ever that a junk-rated country was able to sell 100-year bonds denominated in a foreign currency, or any currency.
Argentina sports a ‘B’ credit rating from Standard & Poor’s. Five notches below investment grade. Deep junk.
And 100 years is a very, very long time for Argentina and its regularly beaten-up creditors: Just over the past 65 years, it has defaulted six times – in 1951, 1956, 1982, 1989, 2001, and its ‘selective default’ in 2014. Its default in 2001 on $80 billion of dollar-denominated debt was the largest sovereign default at the time.
And yet, yield-desperate investors don’t seem to care. According to The Wall Street Journal, demand for the private-placement offering was such that Argentina could sell those ‘century’ bonds at a yield of 7.9%, down from the initial price talk of 8.25%.
This post was published at Wolf Street on Jun 20, 2017.
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