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Argentine Bonds Rally After Kirchner Loses in Midterm Election
Bloomberg
June 29, 2009

By Drew Benson

June 29 (Bloomberg) -- Argentine bonds jumped a day after President Cristina Fernandez de Kirchner's ruling coalition lost its majority in both houses of Congress in midterm elections.

The yield on the country's benchmark 8.28 percent dollar bonds due in 2033 plunged 1.21 percentage points to 15.89 percent at 8:20 a.m. in New York, according to JPMorgan Chase & Co. The bond's price rose 4.25 cents on the dollar to 51 cents.

The extra yield investors demand to own Argentina's dollar bonds instead of U.S. Treasuries shrank 1.48 percentage points to 9.94 percentage points, the smallest since Sept. 30, according to JPMorgan.

Five-year credit-default swaps based on Argentina's bonds dropped 51 basis points to 22.71 percentage points, according to Bloomberg data. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Credit-default swaps, which are used to hedge against losses or to speculate on a company's or a country's ability to repay its debt, pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent.

To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net.

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