Argentina started the year with borrowing costs about 3.5 percentage points above U.S. Treasuries, and below the average for high-yield issuers in emerging markets.
After the rout this year driven by rising U.S. rates, turmoil in Turkey and Argentina’s own realization that it needed to shore up its fiscal accounts much faster than planned, bond yields blew out to trade above names like Ecuador, Ukraine and Lebanon in August in September. The so-called spread peaked at 7.84 percentage points just two weeks ago.
Now, with commodities rebounding and some large investors calling a possible bottom to the emerging-market bloodbath, Argentina is regaining some of that lost credibility in the bond market. This month alone, spreads over Treasuries have tightened 150 basis points compared with an average of 18 basis points for developing peers, according to data compiled by JPMorgan Chase & Co.
As traders await word from the International Monetary Fund on whether it will grant Argentina’s request to accelerate disbursements of a record $50 billion credit line, investors are snapping up assets on the cheap and the central bank has managed to stop the bleeding in the peso market -- establishing something of a floor at 40 per dollar.
In the road back to some normalization, it’s one step at a time, or one basis point at a time.