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Debt bonds fall despite recommendations from Wall Street
Clarin
March 04, 2010

In the U.S., they're betting on the government's need to close the swap

Yesterday, bonds ended their rally of the week. While it was not generalized, the drop off reached almost 3% on some bonds. Thus the market, which had been pushed on by Monday's new decree to pay debt with reserves, was tripped up by the political tension created by the defeat of the government in the Senate. Analysts predict that the climate of uncertainty will be prolonged for days, while from Wall Street the recommendations continue in favor of the purchase of local bonds.

"The operators are not coming out desperate to sell, but they lowered their risk preventively. For that the sales were selective (among the most affected were the coupons attached to GDP, the Par and the Bogar 18). Despite all the conflict, there were recommendations from banks abroad and that put pressure in the opposite direction," said Adrian Perez, from Rava. Yesterday Credit Suisse joined JP Morgan and other investment funds in recommending the purchase of Argentine bonds.

"We believe that the (debt) swap will take place. The government needs to return to the market and by establishing new funds to pay its debts with multilateral organizations and creditors it has sent a signal that it has the cash and it's going to use it," said Carola Sandy of Credit Suisse to Clarin.

In its report, Credit Suisse warned that the political situation in Argentina remains tense. "The government doesn't have the support of the majority in either of the Houses of Congress," it said, and added that, however, "it has done the impossible by showing that it has access to funds to pay debt for the rest of the year."

"Despite all that has happened, the bondholders want to arrive at an agreement and the government wants that because it needs to return to the markets. Otherwise it will not have financing and the Kirchners will lose the elections in 2011," said Alberto Bernal of Bulltick Capital Markets. The analyst said that the way in which the government is operating "is totally aberrant and goes against the institutions." Bernal agrees with the position of JP Morgan to say that the interest by investors in the swap continues and for this if the government arrives at making an offer it will be successful.

"I'm sorry for the Argentine people, that the government is doing so much against all the principles of democracy, but we are not here to concern ourselves with Argentina's institutions. For the market all that is irrelevant and the interest in the swap continues," said Shahriar Shahida, of Constellation Capital.

On Wall Street they don't believe that the vulture funds will manage to embargo the reserves. "The government asked the Central Bank to lend it the reserves and they issued letters. With that, they recognized that the reserves belong to the Central Bank and the theory of alter ego isn't going to fly," they say.

Ana Bar n (Washington)

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