Blue Chip Swap Rate Widens After Peronists Win Presidential Election
As expected, the Peronist ticket of Alberto Fernandez and Cristina Fernandez de Kirchner has won the Argentine presidential election. By securing 47.79% of the vote, the pair secured outright victory over incumbent president Mauricio Macri. In response to the election results, the already-precarious value of Argentine bonds has declined and the Blue Chip Swap rate has widened.
We provide clients who have operations in Argentina with foreign exchange solutions, and have created a live table that you can use to calculate your own potential savings by using the Blue Chip Swap. We are using Apple (AAPL) as a reference point, but other securities can be used upon request. Click here to view our table.
Blue Chip Swap Rate Reaches 37%
Argentine bondholders will likely be dismayed by the return to power of those many consider to be responsible for Argentina's economic woes. Our clients, however, are more concerned about the currency controls re-implemented by President Macri, and whether or not those currency controls will be tightened under the new government.
The Blue Chip Swap spread, which measures the premium that investors are willing to pay in order to move funds out of the Argentine Peso and into US Dollars, widened to over 37% after Sunday's election. Below is a graph showing how the Blue Chip Swap rate has grown over this year:
Data from Bloomberg, October 28, 2019
Investors are worried that the new government could implement some of the tighter currency controls that were last in place in 2015. These restrictions include a requirement that securities be held for 72 hours before being sold on the Argentine exchange, which would introduce an element of market risk into the Blue Chip Swap transaction.
Currently, the Blue Chip Swap rate provides an excellent opportunity for those with operations in Argentina to get more value on their FX transactions.
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If you have operations in Argentina, please reach out to our team to learn how we can mitigate your foreign exchange risk. Email us or call at 1.604.643.0101