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Old 08-28-2018, 05:37 PM
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Default Argentina's 100 year bond

I'm new to actuarial and finance in general, but I recently read about argentinas 100 year bond that was issued last summer. Seeing that it's close to 10% yield, does that mean after 10 years the investor has made back his money (not taking into time value of money). Taking time value of money into account, at around 14 or 15 years, the investor would have made some profit... and the coupon payments thereafter would be full on profit.

So is it true that Argentinas doesn't have to hold out for the full 100 years for investors to find the investment profitable?

Please let me know if I'm oversimplifying something!
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Old 08-28-2018, 06:20 PM
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Here is an earlier post from 2017:
http://www.actuarialoutpost.com/actu...&postcount=157

Quote:
Argentina sold $2.75bn of the debt with a coupon of 7.125 per cent, equating to an annual yield of 7.9 per cent, according to a statement from the Argentine finance ministry late on Monday. The bond attracted $9.75bn in orders from investors.

If Argentina fulfils its promises to reduce its deficit, meeting its fiscal targets, there is a good chance that Argentine bond prices will rally significantly over the next couple of years. Given the bond was sold at a yield of almost 8 per cent an investor would recoup their initial investment in around 12 years.

Yields could fall by at least 150 basis points, moving more in line with other major economies in the region such as Brazil — implying capital gains on such bonds in the double digits. “Those are pretty good returns. At a rate of 8 per cent or higher, it’s a buy,” Mr Costa said.
Obviously, this is assuming Argentina doesn't default again.
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Old 08-28-2018, 07:17 PM
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Depends on if you subscribe to the "God is Argentinian" or "Disintegration in Hell" theories of the Argentina economy.
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Old 08-28-2018, 07:32 PM
Dr T Non-Fan Dr T Non-Fan is offline
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Quote:
Originally Posted by hostess View Post
I'm new to actuarial and finance in general, but I recently read about argentinas 100 year bond that was issued last summer. Seeing that it's close to 10% yield, does that mean after 10 years the investor has made back his money (not taking into time value of money). Taking time value of money into account, at around 14 or 15 years, the investor would have made some profit... and the coupon payments thereafter would be full on profit.

So is it true that Argentinas doesn't have to hold out for the full 100 years for investors to find the investment profitable?

Please let me know if I'm oversimplifying something!
You asked.


Rule of 72. Look it up.

Also, assuming that the coupon revenue is just wasted on hookers and blow? Or will it be invested so it can be wasted on MORE hookers and blow later?

Also: Risk is that Argentina defaults on these, and no, you don't get Messi as collateral Repo. Another risk is inflation, which when converted to dollars might result in a loss relative to other investments.

And, why is this in "Life"? Should be in "Finance/Investments."

Lastly, there is an assumption that one bought this at par. Might be worth more than par, assuming the market believes the risks noted above are low.
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Old 08-29-2018, 01:41 PM
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Originally Posted by Dr T Non-Fan View Post
Lastly, there is an assumption that one bought this at par. Might be worth more than par, assuming the market believes the risks noted above are low.
You don't think you can beat the market? Oh wait, that's another thread.
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Old 08-29-2018, 03:21 PM
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Exchange rate risk is perhaps the biggest risk. If you get paid in Argentinian dollars that deflate by 8% per year, for example, you're getting zero interest.
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Old 08-29-2018, 03:35 PM
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I assume it was U.S. dollar-denominated. There's currency risk there, too, but it would be a different risk profile.
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Old 08-29-2018, 04:41 PM
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https://www.bbc.com/news/business-45...eporting-story

Quote:
Argentina's government has unexpectedly asked for the early release of a $50bn (37.2bn) loan from the International Monetary Fund.
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Old 09-11-2018, 07:51 PM
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Originally Posted by ActuateThis View Post
Depends on if you subscribe to the "God is Argentinian" or "Disintegration in Hell" theories of the Argentina economy.
lmao
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Old 09-11-2018, 08:32 PM
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Originally Posted by Numbers Nerd View Post
Exchange rate risk is perhaps the biggest risk. If you get paid in Argentinian dollars that deflate by 8% per year, for example, you're getting zero interest.
Default risk is by far the biggest risk of these bonds.
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