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Argentine bonds attractive due to high interest rates: experts

Xinhua, April 28, 2016 Adjust font size:

Argentine President Mauricio Macri said Wednesday that his economic policies are aimed at achieving "zero poverty" in the country. The statement came after the nation paid back the so-called "vulture funds" Friday that sued it over nine billion U.S. dollars in defaulted bonds, ending its 15-year-long default status in a bid to return to the international credit markets.

In an interview with Xinhua on Monday, experts said that the record 70 billion U.S. dollars Argentina has received for its bonds, which were issued last week to end the nation's default, should be attributed to the high interest rates of 7.14 percent on average. The number also made the country the only one in the region whose bond rates surpassed 4 percent.

Gustavo Girado, head of the Asia and Argentina Consultancy, said that "in a world of very low interest, the Argentinean bonds have a very high expected return."

Augustin Etchebarne, director of the Public Policy Research Center of the Liberty and Progress Foundation, also said that Argentina's status of undercapitalization and its depreciation of assets have made itself attractive to international investors.

"It also has a new government which wishes to change economic policies to restore international trust in the country," he said.

Matias Carugati, chief economist at the Management and Fit (M&F) consultancy, added that the risk Argentina is taking in issuing bonds also increase its attractiveness.

"The end of Argentina's default greatly reduced its risk rating and made its bonds attractive," he noted.

However, some experts warned that the surge in the market's demand for Argentinean bonds may represent a heavier financial burden on the country.

"I am not certain these offers are due to an interest in Argentina itself, or the extraordinary interest," said Girado.

He further explained that "after a decade of continuous policies seeking to reduce debt, Argentina is now paying its old debts by taking out new ones, without genuine resources. It has left this past aside to return to capital markets, by entering into debt." Endi