Tuesday, June 27, 2017

Argentina sells 100-year bonds

When I took this poll, Argentina's 100-year bonds were getting 71% of the votes. Which is how I voted, too.

Hundred-year bonds real are a nutty idea.

Eduardo Diana reports on the poll, which of course is just a Twitter poll, in this case from a Financial Times editor, in El bono a 100 años, "la locura más grande del mundo" Página/12 27.06.2017.

James Saft explains the background of the 100-year bond sale in the English-language Century bonds: a lesson in market nonsense and incentives Reuters/Buenos Aires Herald 06/27/2017:

Such is the case with news that Argentina plans to sell a 100-year bond, a story tailor-made to illustrate exactly how extreme financial market risk-taking has become. It also shows that global investors either a) have the attention span of a gnat or b) are not paid for making good long-term decisions. I’ll vote for the latter, but am willing to listen to arguments for the former. ...

Sober, sensible bond fund managers, the ones who don’t invest as if central bank liquidity will be endless, have had a tough few years. Their peers more willing to take risks have been right, and may well continue to be right, at least as the game they are playing judges rightness.

Capital markets do not discipline borrowers when they are dominated, as they are, by agents acting for principals. For the International Monetary Fund or any other person or body to speak as if they do or will is absurd. All that counts is how the credit looks in the time frame against which the performance of the fund manager is judged.

So, the markets are on a momentum high and risk-taking, at its far reaches, is extreme.

Remember, this is the same market that brought you 800-some crypto-currencies with a value of more than $100 billion. By comparison, 100-year Argentina bonds are stolid, sensible investments appropriate to widows and very young orphans.
Obviously, the Argentine press has been covering this quite a bit:

Journalist Victor Hugo criticizes the deal, El Diario: Editorial de Víctor Hugo sobre deuda a 100 años C5N 27.06.2017


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