(Bloomberg) -- Argentina’s sovereign bonds climbed after local media reported late on Wednesday that lower house Speaker Sergio Massa was poised to be named as the country’s new economy minister.
The nation’s dollar bonds due 2029 climbed as much as 1.8 cents to about 22 cents on the dollar, the highest in over three weeks, according to Bloomberg data. Benchmark bonds due 2030 rose as much as 2.2 cents to over 23 cents on the dollar.
Massa, if confirmed, would be Argentina’s third economy minister in less than a month, replacing Silvina Batakis who took the role on July 4, after her predecessor Martin Guzman unexpectedly resigned. Argentina’s bonds touched lows last week amid uncertainty over the policy direction of the country, wracked by inflation accelerating above 64% and a dearth of international reserves.
“We think the positive reaction of the market to a potential appointment of Sergio Massa to the cabinet is based on the expectation of him implementing some stabilization measures, including a devaluation of the peso and a fiscal adjustment, which would be credit positive,” said Marcos Buscaglia, founder of Buenos Aires-based consulting firm Alberdi Partners.
In a tweet, Massa said he had seen “rumors” and had not been made any offer but was expecting to speak with President Alberto Fernandez between Friday and Saturday.
If confirmed, Massa will inherit enormous challenges: Economists see inflation reaching 90% this year, the central bank’s reserves are razor thin and the country is behind on the targets it must meet to comply with a $44 billion program with the International Monetary Fund.
Local outlets Clarin and La Nacion reported the cabinet shakeup on Wednesday night as Batakis was returning from her first international trip to meet IMF, World Bank and US Treasury officials as well as private investors in Washington.
Read More: Argentina’s Batakis Agreed With Investors on Need for Rate Hike
A former mayor who built his reputation as being tough on crime, Massa is seen as one of the more market-friendly figures within the ruling coalition. He was cabinet chief between 2008 and 2009 during the presidency of Cristina Fernandez de Kirchner. He ran for president in 2015, finishing in third place, and in 2019 returned to the wider leftist coalition that now governs.
“Massa and his team seem poised to take over several key administration posts,” said Pablo Waldman, a senior strategist at Inviu in Buenos Aires. “Even if his convictions are notoriously flexible, the move could help reduce the worst market fears in the long march toward the 2023 presidential elections.”
Here’s what other investors are saying about Massa’s potential appointment:
Edwin Gutierrez, Aberdeen Asset Management
- “Massa would only take the job if he gets ‘Super Minister’ powers. The knee jerk reaction is positive as you can see, but this will be rife with implementation risk”
- “Rumor has it that Massa wants to cut subsidies immensely, but you know that’s going to put people out on the streets. So it depends if as ‘Super Minister’ he gets control of street protest groups as well”
Graham Stock, Bluebay Asset Management
- “Our ongoing thesis is still intact – that this government’s woes will usher in a more market-friendly administration in the 2023 elections if not before”
- “The current depressed levels of bond prices more than compensate for any subsequent restructuring that might be required”
(Updates with background, quotes)
©2022 Bloomberg L.P.
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