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Moody's: Argentina's new rule on government bonds to benefit funds, investors

A measure from Banco Central de la República Argentina that will allow it to trade government securities and offer repurchase agreements with local mutual funds is credit positive for bond funds and investors, Moody's said Jan. 9.

The rating agency expects the move to increase liquidity in government securities for managers of T+1 short-term bond funds as well as investors, which will be guaranteed timely redemption payments due to the central bank's repurchase agreements, or repos.

T+1 funds' assets under management dropped by about 70% after the government announced in August 2019 that it would restructure some of its short-term debt in both pesos and dollars. Because of the government's move, asset managers had to change their investment strategies, with some putting assets primarily in money market funds.

"As a result of increased liquidity and investor confidence, T+1 funds should regain some ground lost to money market funds," Moody's said, noting that the segment could gradually grow to a 25% average market share by the end of 2020 from below 10% currently.