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Argentina Bonds Pull Back On Profit-Taking After Vote Surge
Dow Jones Newswires
June 30, 2009

By Shane Romig Of DOW JONES NEWSWIRES

BUENOS AIRES (Dow Jones)--Argentine bonds Tuesday gave back some of the steep gains posted the day before, as traders took profits on the vote-inspired rally.

"As expected, there was profit-taking after gains of up to 14% yesterday," Portfolio Personal said in a market note.

Bonds had soared Monday after the ruling coalition suffered a significant setback in midterm congressional elections, raising hopes of a friendlier environment for business and foreign investment.

Sentiment improved on expected curbs on the wide-ranging powers of the ruling couple of President Cristina Fernandez and her husband, former President Nestor Kirchner.

Kirchner's slate for Buenos Aires province came in second to the Union Pro ticket of Francisco de Narvaez in Sunday's elections.

Argentina debt was upgraded to overweight from marketweight on JPMorgan's widely tracked Emerging Markets Bond Index Global.

JPMorgan recommended buying more of Argentina's Boden 2012 and 2015 bonds in the wake of the election setback for the Kirchners.

The results "boosted the prospects of potential presidential candidates that are more inclined to consensus-building, pro-business policies both outside and within the Peronist Party," JPMorgan analysts said in a note to investors.

On Tuesday, the benchmark peso-denominated bond fell 2.29% in price terms to ARS72.50, to yield 15.44%.

The dollar-denominated Boden 2012 fell 4.06% in price terms to ARS246, to yield 25.61%.

Meanwhile, stocks posted small losses on Tuesday, but closed out a second quarter that saw sharp gains.

Argentina's Merval Index shed 0.08% to close at 1,587.97 points.

Argentina's stock market roared to life in the second quarter, on the back of rising oil prices. The index is dominated by Tenaris (TS) and Petrobras (PBR), two essentially non-Argentine companies whose fortunes are determined by the oil sector.

The Merval index, which represents just 11 companies, soared 41% in the second quarter.

It's no coincidence that figure matches almost identically the 41% increase in crude oil during the second quarter. Light, sweet crude saw its biggest quarterly percentage gain since the quarter ended Sept. 28, 1990, during which time Saddam Hussein's Iraq invaded Kuwait.

Tenaris, owned by Argentine-based conglomerate Techint but incorporated in Luxembourg, largely earns its income from offshore sales to big oil drillers away from Argentina. Brazil's state-owned oil giant, Petroleo Brasileiro, or Petrobras, has a supplemental listing in Buenos Aires but has relatively little business in the country.

The peso resumed its measured slide again the dollar Tuesday after getting a boost following the election results. The peso fell to 3.7975 to the dollar from 3.7900 Monday.

-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com

(Matthew Cowley contributed to this report.)

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