Argentina downgraded to nearly junk status

[perry]

Argentina Slammed by Double Downgrade at End of Traumatic Week

Argentina was downgraded deeper into junk territory by two of the three biggest ratings companies as markets brace for a possible default after the populist opposition won a landslide victory in Sunday’s primary election.

www.bloomberg.com

The powers that control Argentina want to punish her for expressing their collective vote and saying no to austerity and servitude. People voted against Macri due to their terrible financial situation . Unfortunately I believe it will get much worse if Argentina defaults

 

[camberiu]

I don't think you understand how the bond markets work.

The powers that control Argentina want to punish her for expressing their collective vote and saying no to austerity and servitude.

If Argentines are collectively saying that they are not going to pay their debt, guess what happens to the the value and rating of that debt? Or were you expecting the rating to go up as a response to a threat of default?

If Cristina wants to default, default. That is a valid political strategy, but own up to it. Don't gaslight the situation by blaming the evil capitalists for the junk status. Junk status is the natural and expected consequence of the threat of default.

 

[perry]

I don't think you understand how the bond markets work.



If Argentines are collectively saying that they are not going to pay their debt, guess what happens to the the value and rating of that debt? Or were you expecting the rating to go up as a response to a threat of default?

If Cristina wants to default, default. That is a valid political strategy, but own up to it. Don't gaslight the situation by blaming the evil capitalists for the junk status. Junk status is the natural and expected consequence of the threat of default.

Please explain why a working class family is to blame for corrupt politicians . The money was borrowed illegally without the authority of the argentinian people and full responsibility should be then put on the politician that borrowed this money. Can you please explain to me by the way where this money went ?

 

[camberiu]

You are mixing up two completely unrelated issues.
Most international bond buyers and rate agencies don't know much about Argentine politics. They know the yield of the bond and they know the rating of the bond.
If the government threatens to default on its debts, the price and rating of the bond goes down. That is universal. Where the money went and which corrupt politician took it is irrelevant on that process.
Now, are there legitimate scenarios for a politician to default on a bond? Sure there are. Some debts are unpayable and the social consts of trying to pay for those debts are too high. However, one is fooling himself/herself if they think that they can default without consequence. If you default or threaten to default, no one else will lend you money. That s not an ideological statement, that is a matter of fact.
Where the money went and how politicians used it is not the bond buyer's problem. That is an Argentine internal matter.

 

[TheDonald]

Argentine debt is rated because it was to Argentina's advantage. Rating agencies do not rate most debt for free; they charge the borrower to initiate a rating and they charge for ongoing rating service. Debt rating is a time-consuming, elaborate, highly involved process.

Argentina issued dollar denominated, rated debt for three reasons - all of them to Argentina's advantage. First, by issuing dollar debt, Argentina widened the pool of potential buyers significantly, thereby garnering a lower interest rate. Second, by issuing debt in the US, specifically New York State, Argentina garnered a lower interest rate, through buyer confidence that their rights would be honored in a court of law. Third, by getting the debt rated by at least 2 of the three big credit raters, Argentina garnered a lower interest rate.

Notice that all three choices, made by Argentina, were to Argentina's economic advantage: a lower interest rate. Issuance of debt in Argentine pesos, under Argentine law, and unrated, would have gone nowhere. No one would have bought such bonds.

Argentina mostly operates domestically in a fantasy world. Crimes are not punished, lack of initiative is rewarded, workers would rather strike than work. When Argentina issues debt to international investors, with a rating, under US law, it plays in the real world. Mistakes are punished. Dishonesty produces alienation. Unfulfilled promises are expensive.

When Argentina, or any debtor, issues bonds, it signs an indenture. This is a legal contract outlining each party's rights and serves as a promise to pay. Breach of the indenture is just like breaching any other contract. For those who lament this process, I would suggest they reflect on their own personal history and consider a time when someone broke a financial promise to their detriment. It is not fun, it is usually expensive and it often produces considerable emotional angst. Argentina is headed for a debt default, which means a breach of its promise to pay those who lent it money. It is too simplistic to think of counterparties as "Wall Street sharks." The institutions that lent Argentina money represent thousands of people, many of them retirees, retail investors, mom and pops. An Argentine debt default will economically harm many innocent investors who entrusted their money (mostly indirectly) to Argentina. Just as if you lent money to a friend who refuses to pay you back.

Fitch, the agency that downgraded Argentine sovereign debt to the same level as Zambia, is acting anticipatorily. Financial markets are forward looking, they assimilate all available information to create a future outlook. Argentina is a far riskier investment after election results last Sunday. Argentina must pay for its increased risk profile. This is the way of the developed world.

 

[perry]

The Donald why are the people only responsible for the corruption and blatant mismanegement of the argentinian economy I believe that the politicians who make these decisions without a referendum must also accept responsibility and pay as well . I find it outrageous that these politicians just jump ship and live the high life in Europe and the people are left living like paupers in their home country .

The debt to the imf is a case in point . This money was borrowed without the peoples approval and not used correctly . I believe that most of this debt has been spent propping up the devalued peso . This goes against the imf rules but they very quiet on this issue There has been no accounting presented to the argentinian public on debt taken which is contrary to all decency .
.
These politicians will live in luxury without repercussions but the battered Argentinian populace for 10 years or more will have a very diminished standard of living . It might be legal to downgrade our debt level but imho it should be illegal to destroy all peoples hopes and cause financial terrorism on the majority of the population due to the mismanagement of their economy by inept politicians

 

[Mitch]

Argentina Slammed by Double Downgrade at End of Traumatic Week

Argentina was downgraded deeper into junk territory by two of the three biggest ratings companies as markets brace for a possible default after the populist opposition won a landslide victory in Sunday’s primary election.

www.bloomberg.com

The powers that control Argentina want to punish her for expressing their collective vote and saying no to austerity and servitude. People voted against Macri due to their terrible financial situation . Unfortunately I believe it will get much worse if Argentina defaults

Did you mean to say "when" Argentina defaults?

 

[Mitch]

Argentine debt is rated because it was to Argentina's advantage. Rating agencies do not rate most debt for free; they charge the borrower to initiate a rating and they charge for ongoing rating service. Debt rating is a time-consuming, elaborate, highly involved process.

Argentina issued dollar denominated, rated debt for three reasons - all of them to Argentina's advantage. First, by issuing dollar debt, Argentina widened the pool of potential buyers significantly, thereby garnering a lower interest rate. Second, by issuing debt in the US, specifically New York State, Argentina garnered a lower interest rate, through buyer confidence that their rights would be honored in a court of law. Third, by getting the debt rated by at least 2 of the three big credit raters, Argentina garnered a lower interest rate.

Notice that all three choices, made by Argentina, were to Argentina's economic advantage: a lower interest rate. Issuance of debt in Argentine pesos, under Argentine law, and unrated, would have gone nowhere. No one would have bought such bonds.

Argentina mostly operates domestically in a fantasy world. Crimes are not punished, lack of initiative is rewarded, workers would rather strike than work. When Argentina issues debt to international investors, with a rating, under US law, it plays in the real world. Mistakes are punished. Dishonesty produces alienation. Unfulfilled promises are expensive.

When Argentina, or any debtor, issues bonds, it signs an indenture. This is a legal contract outlining each party's rights and serves as a promise to pay. Breach of the indenture is just like breaching any other contract. For those who lament this process, I would suggest they reflect on their own personal history and consider a time when someone broke a financial promise to their detriment. It is not fun, it is usually expensive and it often produces considerable emotional angst. Argentina is headed for a debt default, which means a breach of its promise to pay those who lent it money. It is too simplistic to think of counterparties as "Wall Street sharks." The institutions that lent Argentina money represent thousands of people, many of them retirees, retail investors, mom and pops. An Argentine debt default will economically harm many innocent investors who entrusted their money (mostly indirectly) to Argentina. Just as if you lent money to a friend who refuses to pay you back.

Fitch, the agency that downgraded Argentine sovereign debt to the same level as Zambia, is acting anticipatorily. Financial markets are forward looking, they assimilate all available information to create a future outlook. Argentina is a far riskier investment after election results last Sunday. Argentina must pay for its increased risk profile. This is the way of the developed world.

There not innocent investors if they "invested" in Argentina. They are either ignorant, greedy or long shot gambling "investors".

 

[MatameBA]

There not innocent investors if they "invested" in Argentina. They are either ignorant, greedy or long shot gambling "investors".

If you have money in any retirement plan (e.g. 401k, Roth IRA, or your country's equivalent) there is a very good chance some of your money was at one point invested in Argentina. All large funds invest in a mix of assets. The majority are safe / low-risk like US treasury bills. And a minority are considered riskier, like bonds from emerging markets like Argentina.

 

[Mitch]

If you have money in any retirement plan (e.g. 401k, Roth IRA, or your country's equivalent) there is a very good chance some of your money was at one point invested in Argentina. All large funds invest in a mix of assets. The majority are safe / low-risk like US treasury bills. And a minority are considered riskier, like bonds from emerging markets like Argentina.

You make a good point. Pardon the following semantics: In that case, those that actually invested the money are more greedy than ignorant and more certainly, corrupt.