Investors are split on whether Argentine bonds can deliver stellar Ukraine-style returns ahead of a likely electoral win for Alberto Fernandez's market-antagonistic government on 27 October.
Some sovereign bonds issued by Argentina fell steeply to a face value in the mid-30s in August, after President Mauricio Macri suffered a larger-than-expected defeat in a primary election (PASO).
The fall mirrored moves in the Ukrainian bond market five years ago after Russia invaded the country. Those Ukrainian bonds went on to double investors' money in a short period of time and some are hoping for a similar result in Argentina, with others sceptical of a repeat.
Macri had been expected to lose narrowly before overturning the result on election day, as he had in 2015. The eventual large margin defeat seemingly ended this hope, spooking investors.
"It is possible Macri pushes Fernandez to a second round, but if the PASO results were repeated then Fernandez would win in the first round outright," said Nachu Chockalingam, senior emerging market debt portfolio manager at Hermes Investment Management.
Greg Mariasch, partner and portfolio manager at Pembroke Emerging Markets, a BennBridge boutique, said the PASO "left the country in a political, economic and financial limbo".
Markets collapsed and the currency depreciated significantly, resulting in a sharp rise in the value of its foreign exchange debt and pushing its debt-to-GDP ratio to almost 100%.
With its $57bn IMF bailout having almost already been fully disbursed, Macri was forced into enacting capital controls and looking to restructure the government's debt payments.
The face value of the bonds has recovered to trade in the low-to-mid-40s today, but they are still fully pricing in a bad default, according to Allianz Global Investors' Mike Riddell.
The fixed income portfolio manager said the country already has the mantle for the worst default in modern history in terms of recovery value, with bond investors seeing a 70% haircut in 2001.
As a result, Riddell said the team has been considering increasing its small position in Argentina recently, though have not moved yet.
He referred to Ukraine's plight five years ago, when bonds traded at a cash price of around 40 at their nadir.
Riddell, who then worked with M&G, recalled: "You could not have made a worse case for Ukraine bonds back then. They had lost part of their country, their banking system had basically gone bust, the IMF would not bail them out and the bond market was 40% owned by one investor, which was itself experiencing massive outflows."
Shortly after, the country announced a debt restructure, meaning anyone that had invested at 40 doubled their money within around ten months.
"So, Argentina is getting very interesting. We are not adding yet, but when you see signs of massive distress then usually that is a buying opportunity, not a selling opportunity."