June 8, 2018 / 12:47 PM / 17 days ago

Argentine bonds rally after IMF deal; peso expected to float

BUENOS AIRES, June 8 (Reuters) - Argentina’s bonds rallied early on Friday after the country signed a $50 billion standby arrangement with the International Monetary Fund, while analysts zoned in on comments indicating the central bank would stop protecting the peso currency.

Argentina announced on May 8 it was turning to the IMF after a selloff in emerging markets prompted a run on the peso. For the past few weeks, the central bank has offered to sell $5 billion in reserves at 25 pesos per dollar, effectively preventing the currency from falling below that level.

At a news conference on Thursday night, central bank Governor Federico Sturzenegger suggested the bank would change tack as a result of the deal, which included pledges from Argentina to speed up fiscal deficit reduction and end central bank financing of the Treasury.

“The way the central bank has been operating in the past few weeks had a lot to do with how to confront the turbulence in the foreign exchange market, which in our understanding has been surpassed with the disbursement and approval of this package,” Sturzenegger said.

“Tomorrow we will return to a normal situation in the functioning of the exchange rate regime.”

Argentina’s country risk - a J.P. Morgan measure of the difference between the country’s bond yields and less risky alternatives - fell 14 points early on Friday morning to 467 . Its 100-year bond maturing in 2117 was up 1.6 percent at 88.18 cents on the dollar as of 9:22 a.m.

Trading in the peso currency was expected to begin at 10 a.m. local time (1300 GMT) while the stock market opens at 11 a.m.

“In the short-term we expect a rally in Argentinean assets,” Ezequiel Zambaglione, head of research at Buenos Aires brokerage Max Valores, wrote in a Friday note to clients. “The announcement was above market expectations in the amount and fiscal targets.” (Reporting by Luc Cohen and Jorge Otaola Editing by Bill Trott)

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