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Argentina wows market with first bond in 15 years

[NEW YORK] Argentina got an enthusiastic welcome back to the club of borrower nations on Monday, amassing more than US$65 billion in orders for its first international bond in 15 years.

A market pariah since defaulting on its debt in 2001, the country clearly won over investors with an up to US$15 billion bond whose proceeds will help pay its long-complaining creditors.

The surge of demand for the bond, which will price on Tuesday, allowed Argentina to set pricing guidance close to its optimistic funding costs for the ground-breaking deal. "It is fantastic that Argentina is accessing the market,"said John Baur, a portfolio manager at Eaton Vance. "This is certainly a very important step in the direction of improving the future of Argentina economically."

Litigant bondholders who rejected the terms of Argentina's debt restructuring and filed suit for a better payoff will have first dibs on the proceeds of the transaction.

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New President Mauricio Macri wasted little time after taking office in December in agreeing terms with most of the holdouts to help smooth his country's return to the market this week.

The holdouts, led by US hedge funds Elliott Management and Aurelius Capital, will get about 75 per cent of what they had claimed under the agreement.

Meanwhile Argentina gets to draw a line under the messy litigation and re-open the capital taps to help fund his ambitious overhaul of Latin America's third-largest economy.

"It is one of the few positive reform stories in the emerging markets space, where you are seeing economic liberalization," said Mr Baur. "You are not seeing much of that anywhere else in the world." The sovereign was able to tighten pricing significantly across most of the four-tranche bond on the back of strong demand.

At over US$65 billion, the order book is one of the largest ever seen for an emerging markets bond - even exceeding the US$50 billion book for Brazilian oil firm Petrobras's US$11billion six-tranche deal in 2013, according to IFR data.

It set guidance of 7.5 per cent-7.625 per cent on the 10-year tranche - the centerpiece of the offering - in from initial price thoughts of 8 per cent area that were given to investors.

The yield on the 30-year tightened at guidance to 8 per cent from initial thoughts of 85bp over the 10-year's yield.

At the short end of the curve, guidance on the three-year was set at 6.25 per cent-6.50 per cent and on the five-year at 6.875 per cent -7.125 per cent.

Deutsche Bank, HSBC, JP Morgan and Santander are acting as global coordinators on the bond sale, while BBVA, Citigroup and UBS are joint bookrunners.