There's a Sucker Born Every Minute

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I missed that Argentina had succeeded in a bond offering:

BUENOS AIRES (AFX) - Argentina has issued its first treasury bonds for sale to the financial markets since defaulting on its public debt mountain in 2001, officials said

The government's bond offering consisted of 1.0 bln pesos, according to finance secretary Guillermo Nielsen

The interest rate was fixed at 6.51 pct annually, but this could be adjusted according to inflation

Nielsen told reporters yesterday's offering was "very successful" and said it showed Argentina was "returning to normal" on the financial markets

This is actually rational since the country is unlikely to default again quickly. However, who's buying these at a 6.5 yield or coupon? Argetina's inflation rate is at least that high and the politicians of the place don't seem to understand monetary economics.

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Tuesday's Daily News from The Club for Growth Blog on May 17, 2005 10:05 AM

Dems Can’t Just Criticize On Social Security - M. Kondracke, RCP Wexler Offers Proposal to Fix Social Security - Wash Times CAFTA Vote About More Than Trade - A. Shlaes, Chicago Trib Is Tax Complexity Inevitable? - A. Chamberlain, Tax... Read More


a) yr comment skipped the rider: "could be adjusted according to inflation", actually "will" be indexed with CER (consumer price index lagged one month).

ok, there may be some manhandling of prices (i.e. semi-frozen utility rates)
however, although the govt can repress inflation for a while, e.g. until after the oct 23 mid-term elections, eventually the core economic fundamentals catch up

b) Final capital maturities in 2014
so in the decade cycle of argie defaults means holders may miss out on the last couple of services.
however, at 6.5% inflation free, one can afford to only collect the bulk of principal (and put the default then as a kickback -ok. commission is more polite- to the finance bureau officials who sold the sinecure

Thanks for extra info on the adjustment and the "kickback" part is a valid perspective. As this looks like it is in Pesos and not dollars, this will likely cause the government to act better than if it was mostly sold to foreign investors.


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This page contains a single entry by Bob published on May 14, 2005 5:48 PM.

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