Here’s When Everyone Should Have Known That Argentina Would Implode

About a year ago, Argentina – which has inflated away and/or defaulted on its currency every few decades for the past century – issued 100-year government bonds. And the issue was oversubscribed, with yield-crazed developed-world institutions throwing money at the prospect of a lifetime of 7% coupon payments.

A contemporaneous media account of the deal:

Argentina sees strong demand for surprise 100-year bond

(CNBC) – Argentina sold $2.75 billion of a hotly demanded 100-year bond in U.S. dollars on Monday, just over a year after emerging from its latest default, according to the government.

The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.

Thanks to a stronger-than-expected peso currency, the government has increased its overall 2017 foreign currency bond issuance target to $12.75 billion from its previous plan of issuing $10 billion in international bonds, Finance Minister Luis Caputo told reporters in Buenos Aires.

Argentina is going to the international capital markets to help finance a fiscal deficit of 4.2 percent of gross domestic product this year. Caputo said Argentina has $2.6 billion in bonds left to be issued this year. The new paper could be denominated in euros, yen or Swiss francs.

The new bond had a coupon of 7.125 percent, the finance ministry said in a statement that hailed success of the sale as evidence that Argentina had regained “credibility and confidence.”

That similar transactions between US and European “investors” and Latin American countries have happened with regularity and have nearly always blown up in the investors’ faces once again didn’t matter.

And once again it’s blown up. This time with more than the usual shock and awe.

Now the question is, who’s stuck with those 100-year bonds that are plunging in value and will – possibly soon – default? The above article noted that pension funds were especially interested.