Argentina manages to sell a 100 year bond!

Despite all the noise about Argentine economy, the investors continue to buy their bonds. And that too 1oo year ones:

Hyman Minsky must be rolling in his grave at the sight of a country with as checkered a long-run economic history as Argentina successfully placing a 100-year bond in the market. It would have been for him yet another indication of how little markets seem to learn from past experience. It would also likely have been for him a red flag as to how complacent global financial markets have become about risk and how all too likely it is that those markets are now setting up the very conditions for another major global financial market meltdown.

Against the backdrop of the extraordinarily easy monetary policies that have been pursued by the world’s major central banks over the past several years, global investors have been forced to stretch for yield by moving up the risk curve. Taking advantage of these favorable market conditions for issuers, the Argentine government has now successfully placed a 100-year bond in the amount of US $2.75 billion at a rate of 7.9%. A further indication as to how desperate global financial markets have become for yield is the fact that Argentina received bids in the amount of US $9.75 billion for those bonds.

In rushing to buy these very long-dated bonds, global investors are choosing to ignore how poorly managed the Argentine economy has been over the past century. They are also choosing to overlook how divided the country remains today and the questions that all too many years of past mismanagement must raise as to the country’s ability to honor its very long-dated debt obligations.

So much so for economy fundamentals and all that..


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