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Source: WSJ
By: Ken Parks

BUENOS AIRES (Dow Jones)--Argentina's government bonds and stocks rallied Friday, as local assets continued to benefit from the bullish sentiment generated by the government's 2011 budget proposal and Standard & Poor's upgrade of the country's sovereign-debt rating earlier in the week.

Trading volume on the local bond market totaled ARS706.6 million ($178.8 million), accounting for 78% of the Buenos Aires Stock Exchange's total turnover.

President Cristina Fernandez's budget proposal submitted to Congress late Wednesday includes ARS8.7 billion to buy back government debt as well as the use of $7.5 billion of central-bank reserves for debt payments.

Government bonds also got a boost this week from S&P's decision on Monday to lift Argentina's rating by a notch to B--five levels below investment grade--with a stable outlook.

The dollar-denominated Boden 2015 rose 0.7% to ARS362, yielding 10.26%. The dollar-denominated Global 2017 bond--issued in June as part of the government's recent debt swap with creditors--closed unchanged at ARS384.50, yielding 10.10%.

The peso-denominated 2033 discount bond jumped 3.4% to close at ARS146.80, yielding 9.4%.

Argentina's 2035 peso-denominated GDP warrants rose 2% to finish at ARS10.18.

The peso was quoted at ARS3.9525 to the U.S. dollar, compared with ARS3.9500 at Thursday's close. The central bank regularly intervenes in the foreign-exchange market to keep the peso within a tight band.

The local market's Merval index of leading shares rose 1.1% to close at 2473.43 points, just shy of its record high of 2487.76 observed on Sep 4. Volume totaled ARS49.11 million.

The Merval rose 1.5% this week, bringing its year-to-date gains to 6.6%.

Shares of banking group Grupo Financiero Galicia (GGAL) surged 5.5% to close at ARS3.62; shares of energy conglomerate Pampa Energia SA (PAM, PAMP.BA) rose 2.4% to ARS1.73; shares of electricity transmission company Edenor (EDN) added 3% to close at ARS1.38; and shares of electricity transmission firm Transener (TRAN.BA) gained 2.7% to ARS0.9290.

In local economic news, the national statistics agency, Indec, said Friday that second-quarter gross domestic product rose 11.8% on the year on the back of government spending, a rebound in manufacturing, and exports.