UPDATE 1-Argentina country risk narrows to 32-month low

* Analysts say gov’t still unlikely to sell new debt

* Budget approval would free $7.5 bln for debt payments
(Recasts; adds details, analyst comments)

BUENOS AIRES, Nov 4 (BestGrowthStock) – Argentina’s country risk
narrowed to its lowest level in 32 months on Thursday, but
analysts said the drop is unlikely to prompt the government to
tap global markets for the first time since a 2002 default.

The South American country’s debt spreads have tightened
since the country carried out a $12.3 billion debt swap in late
June, stoking speculation that a new issue could be imminent.

The spread between the yield on benchmark Argentine bonds
and comparable U.S. Treasuries narrowed by 10 basis points to
508 basis points at 1700 GMT, according to the JP Morgan
Emerging Markets Bond Index (11EMJ: ).

The spread tightened to 490 basis points earlier in the
day, following a rise in local bond prices, and news that the
U.S. Federal Reserve had decided on Wednesday to buy $600
billion more in government bonds by mid-2011.

Analysts said the government is unlikely to issue new debt,
even though the tighter country risk would allow the country to
sell bonds at a low yield.

“A political reason is holding back the issuance of global
(bonds) that the economic team had planned in the first half of
the year,” said Miguel Kiguel, and economist at the Econviews
consulting group.

“They want to show (their supporters) that they are getting
rid of the debt, and that’s why they don’t issue (debt),”
Kiguel told Reuters.

However, he said that if it could sell bonds at a rate
below 7.0 percent, the government would be tempted to do so.

A New York-based analyst working for a leading global bank,
who asked not to be named, said it was very unlikely that
Argentina will seek to issue debt before Congress votes on the
2011 budget bill, which earmarks up to $7.5 billion in foreign
reserves to pay private creditors.

“If they succeed in getting hold of the reserves the
chances of them issuing debt will decrease a lot,” he said.

Lawmakers are due to vote on the bill next week, and
lawmakers from the ruling party have said they are confident
the budget will pass. For details, see [ID:nN03108644]

Fernandez’s administration has used the central bank’s
bountiful foreign currency (Read more about trading foreign currency. reserves to pay debt this year,
easing tight finances and freeing up money for social spending
ahead of an October 2011 presidential vote.

The government had planned to issue $1 billion in the 2017
paper in June in conjunction with the debt swap aimed at
cleaning up remnants of a $100 billion default.

But officials shelved this plan after the market tanked,
saying they would wait until they could issue debt at a yield
below 10 percent.

In late September, however, President Cristina Fernandez
said her government was not interested in issuing foreign debt
at rates between 8 and 8.75 percent, reiterating the country
does not need the money. [ID:nN24233301]
(Reporting by Walter Bianchi, Jorge Otaola, Karina Grazina and
Guido Nejamkis; Writing by Eduardo Garcia; Editing by Diane
Craft)

UPDATE 1-Argentina country risk narrows to 32-month low