Argentina bonds plunge, black market peso rebounds as economy chief seeks calm

Argentine hundred peso banknotes are displayed in this illustration taken September 3, 2019. REUTERS/Agustin Marcarian/Illustration

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BUENOS AIRES, July 5 (Reuters) – Argentina’s closely watched black market peso rebounded on Tuesday after hitting record lows as the country’s new economy minister sought to calm markets, although sovereign bonds plunged amid broader concerns about the economic crisis and default.

New economy chief Silvina Batakis was sworn in on Monday evening, pledging fiscal responsibility after the abrupt exit of her predecessor, Martin Guzman, sparked concerns about a shift towards populist policies and spending of State. Read more

The black market peso rose 3% to 252 to the dollar after an 8% crash on Monday. It’s a token of true investor sentiment in the currency with the official rate held steady by capital controls that push people into the parallel markets to buy dollars.

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The S&P Merval stock index (.MERV) rose just over 2% in trading on Tuesday after falling on Monday.

However, OTC sovereign bonds, already struggling around 20-25 cents on the dollar, slid an average of 3%. A 2030 bond fell almost 11% and a 2035 bond about 8.5%. An Argentinian risk index soared.

Traders said the central bank intervened heavily to support the peso and bonds. The official exchange rate, held on a leash since 2019, edged down 0.18% to 126 to the dollar.

“The market is hot, with a central bank selling dollars and intervening in bonds, pesos to try to hold their prices down,” economist Rodrigo Alvarez said.

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Reporting by Jorge Otaola; Additional reporting by Rodrigo Campos; Written by Adam Jourdan; Editing by Bill Berkrot and Alistair Bell

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