Argentina to Issue 100-Year Bonds
Just a year after returning to international markets to collect debt and after leaving the financial 'default' and settling the disputes for this debt, Argentina surprises now with its plans to issue 100-year bonds with an annual return of 8.25%. Funny thing is that, it's buyers, mostly pension funds, will be fighting to the hold of such bonds. This is the era in which we live in, the era of financial repression, imposed by the Central Banks, which causes investors to buy anything that shows a minimal decent profitability.
Citi, HSBC, Nomura and Santander will be the placing banks.
Needless to say 100 years are a lot of years, specially taking into account the country's track record defaulting its sovereign debt, accumulating 6 defaults in the last 100 years. So in keeping with its history, I do not know if 100-year Argentine bond buyers will get much return on their investment but what if it seems certain is that in the next 100 years they will be busy and entertained.
Now, the fact that a country is allowed to issue debt that will have to paid back not only by the country's children but also the grandchildren, leaves room for some ethical thought. Will Argentina repeat the same mistakes over again?
Given the track record of the country, It is crazy to invest on those bonds unless you work for a hedge fund and can sense some profit to be made.
100 years is a very long time for roi. Even if there is 8%. They should at least increase the interest for the chance of Argentina defaulting again is very high.
I dont understand why argentina government need to issue an 100 years bond. 100 years is a long term but they can always just issue a perpetual bond with a call back feature. That way you can find comparison and price the bond. I am not sure how u can price a 100 year bond effectively.
There's another caveat to this that the media is not telling us.
Anyone that bought these bonds also opened themselves up to not just a 100 year payout structure, but also to the US dollar. That's right, they issued the bonds in US dollar. So investors will be payed in USD, and in 100 years, be paid back the face value of the bond in USD.
This creates a host of problems for both small and large investors. If a small investor receives his payments in USD, he will be subject to the fees associated with converting to Peso and whatever value the dollar has at that time.
Also, is the USD going to be around in 100 years?