Source: Zero Hedge
On Monday morning, we reported that in a stunning development, chronic defaulter Argentina – which just one year ago emerged from its latest bankruptcy – has found enough willing greater fools to sell 100-year bonds to. One person who especially stunned, was Mint’s Bill Blain, who issued an entire note describing his disgust with what the market has devolved to.
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Argentina 100 Year Bonds: Really? Nobody Believes, But They Will Buy.
“Everyone should learn to Tango before they die.. ”
Markets can be a triumph of hope over reality. The news Argentina is going to launch a 100 year century bond caught my eye today.
Not much surprises me any more about markets, but really? Really!?
This appears to be a classic example of Blain’s Market Mantra No 3 – “The Markets have no memory, and neither do buyers.”
However, I expect to hear the bond will be massively oversubscribed as investors pile in for the high 8.25% coupon. I doubt anyone on the investor call was particularly convinced by the Argentine pitch, but they will love the coupon… In this financial environment, despite the fact too much cheap QE money has created massive financial asset inflation, you simply can’t pass the opportunity to earn 8% plus by playing pass the parcel with these bonds, hoping to profit for them…
And not being the holder when they stop ticking…. Because the ticking will stop. Momentarily. Before the boom.
Despite every possible natural and immoral advantage possible – including plentiful minerals, rich farmland, perfect beef growing conditions (there was a time when Fray Bentos was Beef!), and quietly replacing the troublesome indigenous native population with Europeans, Argentina has proved as politically stable as a 6 ft high Jenga tower with all the utility of a chocolate tea pot.
Yet the market now wants to lend them 100 year money at 8.25%.
Hmm… stop me… but is that wise? As long as you can keep flipping the bonds ahead of the next crisis.
What has changed that means Argentina has somehow reformed its economy from chronic instability to stability? What makes you think they’ve gone from irregular defaults or debt events ever 25 years or so, to overnight stability?