Aug. 25 (Bloomberg) -- Falling prices for Argentina’s biggest exports pushed government bond yields to a one-month high on concern faltering global economic growth is eroding demand for the country’s soybeans, corn and wheat. The extra yield investors demand to hold Argentine dollar bonds instead of U.S. Treasuries swelled 27 basis points, or 0.27 percentage point, to 754 at 9:52 a.m. New York time, the highest since July 16, according to JPMorgan Chase & Co.’s EMBI+ index. Warrants linked to growth in South America’s second- biggest economy after Brazil sank 0.49 cent for a second- straight day, the biggest daily drop since Dec. 11, to 9.15 cents, according to data compiled by Bloomberg. The drop follows a three-month rally that pushed the yield premium on Argentine bonds, the widest after Venezuela and Ecuador in JPMorgan Chase & Co.’s benchmark index, down from 878 basis points on May 25 as the government completed a defaulted debt swap. Investors’ growing aversion to higher-yielding assets amid concern global growth is flagging may deepen losses in Argentine bonds, said Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal in New York. “There’s been a very large deployment of investor inflows into the debt class and here you necessarily need some consolidation and a breather,” Alvarez said. A report yesterday showed that sales of previously owned homes in the U.S. plunged 27 percent in July, twice as much as forecast, adding to evidence growth in the world’s biggest economy is stalling. The S&P GSCI Spot Index of 24 raw materials tumbled 1.6 percent to an almost seven-week low. ‘Adverse Shocks’ “When there are adverse shocks to the external growth outlook, it will impinge on Argentine asset prices,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York. “That’s especially the case if it’s commodities” that decline, he said. Soybean futures for November fell yesterday to $9.99 a bushel, the lowest price in a month, while corn futures for December delivery tumbled 2.8 percent, the most since July 19, to $4.205 a bushel. Wheat futures for December dropped 2.4 percent, the biggest decline since Aug. 16, to $7.0775 a bushel. Yields on Argentina’s benchmark 7 percent dollar bonds due in 2015 soared 53 basis points to 11.32 percent today, according to data compiled by Bloomberg. The cost of protecting Argentine debt against non-payment for five years with credit-default swaps jumped 26 basis points to 844 yesterday, according to data compiled by CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to debt agreements. Argentina’s peso fell 0.1 percent to 3.9445 per dollar today. Growth Economy Minister Amado Boudou raised his economic growth forecast on Aug. 4 to 7 percent, which would be the fastest since 2007, from about 6 percent after a record 55-million metric ton soybean harvest and a 25 percent increase in auto exports in July from a year earlier. Warrants that pay holders when gross domestic product exceeds government projections began slumping Aug. 20, when government reports showed the expansion in the Argentine economy is slowing. The country’s economic activity, a proxy for GDP, rose 11.1 percent in June from a year earlier, less than the 11.5 percent median estimate of seven economists surveyed by Bloomberg, according to the government. The index slid 0.6 percent in June from May, the first monthly decline since September. Argentina’s industrial production climbed 7.6 percent in July from the year earlier, below the 8.3 percent median forecast in a Bloomberg survey of six economists. The smaller-than-forecast increase in industrial output may be “related to weaker demand from key trading partners such as Brazil,” Carola Sandy, a New York-based economist with Credit Suisse Group AG, wrote in a report on Aug. 23. Industrial output in Brazil, Argentina’s biggest trading partner, fell the most since 2008 in June, the country’s statistics agency reported Aug. 3. --Editors: Lester Pimentel, Richard Jarvie To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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