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Argentina's Stocks, Bonds Up On Debt Rumors And Debt Buyback
Dow Jones
August 26, 2008

By Taos Turner

BUENOS AIRES (Dow Jones)--Argentine stocks and bonds closed higher Tuesday on rumors that the government would restructure its debt and reach an agreement with the Paris Club.

The Merval index rose 0.88% to 1,760.17.

Banking conglomerate Grupo Galicia (GGAL) rose 3.70% to ARS1.4 while Banco Frances (FRAN) advanced 1.28% to ARS5.52.

"Some bank shares and those related to credit did a bit better today, largely because of rumors indicating the government will reach an agreement with the Paris Club and that it will restructure its debt," said Horacio Corneille, a trader at Corneille brokerage.

Not all banks did well, however. Banco Hipotecario (BHIP) bucked the trend and fell 3.8% to ARS1.01.

Meantime, bonds rose as the government continued to buy back local debt, Corneille said.

"Bonds were a bit firmer today because of the government's buyback of bonds coming due next year," he said. "The government faces a serious cash problem and has to pay off more debt next year, so it is coming out and trying to buy back some of that debt now to lower the amount that is coming due. But next year they will still have to deal with this problem."

The benchmark peso-denominated discount bond closed at ARS107.20, down from ARS105.75, to yield 10.14%.

Corneille said bond prices are so low that they should now be attractive to many investors.

"But the problem is that nobody is sure what to believe about the government and its plans," he said. "There is no way to know if any of these rumors are true."

The Argentine peso closed at 3.03 to the U.S. dollar, unchanged from the previous day.

-By Taos Turner, Dow Jones Newswires; 54-11-4590-2421; taos.turner@dowjones.com