Flash Fixed Income Report /

Argentina: YPF's new 10-year bond; attractive IPT

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    24 June 2019
    Published by

    Argentina energy firm YPF (ticker YPFDAR) is scheduled to issue a 10-year "benchmark" bond today, which we believe will be cUS$1.0bn, with initial price talk (IPT) in the "low 9.0%s".

    We believe the yield is attractive, particularly since it appears to pay a handsome premium over the company's US$750mn 7.0% senior unsecured bond due 2047 (B/B), which trades at cUS$87.38 (ALLQ) to yield c8.14% (g-spread 563bps; z-spread 604bps) and duration of c11.75 years.

    Our view is that this premium over the longer-dated bond is mainly due to the current volatile market conditions, which have led to certain potential issuers holding back. We see this as a good opportunity for investors to take advantage of the premium and add or hold YPF paper, given the business outlook seems positive, with oil prices rising, and given substantial investments are expected in the massive 'Vaca Muerta' gas basin, believed to be the second largest in the world.

    We expect robust demand for this new issue (expected to price during today's trading hours) and a strong follow-up in the secondary market, which should bring prices up to at least converge with the yield on the company's 2047 bonds.

    In sum, we like this new YPF issue and expect it to perform well.