Alphacast Highlight: Mutual Funds exposure to Bond Buyback Plan
Alphacast Highlight: Mutual Funds exposure to Bond Buyback Plan
By Mariano Sanchez Moreno (msanchez@alphacast.io)
Read more Alphacast Highlights here
While the NY-law bond buyback programme announced by the Argentine government spurred demand for these bonds, investors eventually seem to have responded with scepticism due to the absence of a comprehensive plan to frame the programme. So far in February, profit-taking trades in GD29D and GD30D bonds has plunged their prices by -14.8% and -12.5% respectively. On perspective, this partially offsets the rally (+32.6% and +33.1% MoM in January) they had in the weeks prior to the announcement.
For those who follow the Argentine Mutual Fund industry and especially for this type of asset class, knowing a Fund's exposure to certain assets is vital. In this sense, Mutual Funds that have a larger weight in their portfolios to GD29 and GD30 bonds will be more exposed to the price volatility associated with the bond buyback programme. As a result, the performance of the Mutual Funds and hence the value of investors' investments will be affected. Based on the latest information available in our CAFCI dataset, here are the 10 Mutual Funds whose portfolios are most exposed to these bonds:
In the meantime, Argentina's risk perception has worsened since the buyback announcement. According to our risk premium dataset, the EMBI+ARG accumulated an increase of +295 bps, while both the region (+21 bps) and the world (+2 bps) smoothly sideway in the same period. At historical levels, Argentina's country risk is trading at similar levels to those of Aug-19, when the previous administration surprisingly lost the primary elections while seeking re-election.
