Article / 20 April 2016 at 8:26 GMT

From the Floor: Comeback kid Argentina rejoices

Former managing editor, / Saxo Bank
  • Argentina returns to the bonds market for first time in 15 years
  • $15 billion multi-issue oversubscribed by 5-1, offers 'decent return' — Boye
  • Brazil's bonds also strengthening as Rousseff impeachment clears hurdle
  • Asian equities slide as PBoC indicates less appetite for stimulus — Liu
  • Coca-cola overstretched at five-year highs ahead of Q1 results — Garnry
  • Trend away from sugar-laden beverages likely to cost the soft-drinks maker
  • Intel 'outlook very bad' as PC market deteriorates — Garnry
  • Silver ratio to gold narrows to 72.6 as open interest hits 92,000 contracts


By Martin O'Rourke

Don't you cry tonight

For those who remember Evita! or even the original classic from Julie Covington, Don't cry for me Argentina has proved to be an oddly appropriate theme for a country that has often been mired in scandal, be it financial or sporting down the years.

But the return of Argentina to the bonds market for the first time in 15 years with a $15 billion, multi-bonds issuance has been oversubscribed by a five-to-one ratio as pent-up demand returns to the fray.

"A 7% return for an eight-year exposure looks like a very decent deal", says Michael Boye, from the fixed income desk. "There is very strong demand for Argentina's return".

Brazil, meanwhile, is mired in a political scandal as the latest development in president Dilma Roussseff's impeachment saw a vote passed in the lower house in favour of moving ahead.

The motion will now pass to the Senate, but, says Boye, Rousseff's troubles have been welcomed by the market with a subsequent beneficial impact on corporate bonds.

"It's not a complete lock that this will pass the Senate, but if it does, we're expecting a further positive reaction in corporate bonds", says Boye. "If we look at the five-year credit default swaps, they have already been narrowing quite a bit through the year".

Argentina returned to the bonds markets after a 15-year absence


Source: Saxo Bank

Sting in the tail

There was a sting in the tail overnight for Asian equities after investors got spooked by a triple whammy: concerns over the coming China financial reporting season, a slide in oil and an indication from the People's Bank of China that less stimulus is potentially on the cards.

The slide in oil was precipitated by the end of a strike in Kuwait that had taken some 1 million barrels/day out of the market and helped to offset the Doha flop on a production freeze deal.

Brent crude was at $43.15/barrel at 0655 GMT. WTI crude was at $41.58/b.

The bigger concern especially on the Chinese mainland was an indication that stimulus might not be quite so available as thought. "There is concern that the People's Bank of China is losing its appetite for adding more stimulus given the recent stronger data out of China", reports Edmund Liu from Saxo Bank's Singapore hub.

That helped send the Shanghai Composite Index down 3.5% at one point although it ultimately closed down 2.31% at 2,972.58. The Nikkei helped to fuel that risk-off sentiment after USDJPY once again tracked below the key 109.00 area after more negative export data out of Japan overnight.

I'd like to teach.....

The world to sing, became the anthemic singalong tune for Coca-Cola from that famous advert in the early 1970s, but it is the globe's gradual shift away from sugar-laden soft drinks that is likely to prove the company's achllle's heel in the future.

"Coca-Cola's share price is trading at some of the highest levels in the last five years, but this is because these staples of the industry like Coca-Cola and Nestle are bid up by the market because of their predictable cash flow and stable business", says Peter Garnry, head of equities strategy at Saxo Bank. 

"It's trading at 24 times forward earnings with negative revenue growth in the US and overseas and there is a trend for lower consumption of soft drinks", says Garnry. "At this point of time, Coca-Cola has got to be a potential short".

Coca-Cola reports today as Q1 earnings season gets into full swing.

Coca-Cola's ever-rising trajectory

Source: Saxo Bank

Talking of earnings, Intel met its Q1 targets but the good news pretty much ends there. The PC maker announced 12,000 job cuts to send the share price down 2.5% and Garnry anticipates that could rise to 4-5% today.

"The outlook is very bad for Intel as it struggles to find their new market in the future and as the PC market continues to deteriorate", he warns.

And finally...

All that glisters is not gold and in this case, it is most definitely silver that is shining bright. Silver rose to $17.326/oz during the Asian session, bringing the ratio to gold into 72.6, Liu reports from the Singapore desk.

"Silver is benefitting from the ongoing decline in USD while demand is up on the stabilisation in China and open interest is at multi-year highs with more than 92,000 contracts", he says.


Now what could be more wholesome than a large-size Coca-Cola? Photo: iStock

Martin O'Rourke is managing editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


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