Argentine bonds are posting the worst rout in emerging marketson concern the government is absent as foreign reserves sink,inflation soars, and the peso depreciates.

The nation's debt has lost 7.5 percent since Dec. 19, the lastday that President Cristina Fernandez de Kirchner appeared inpublic after she had an operation to remove a blood clot near herbrain in October. Developing-nation bonds have gained an average of 0.9 percentin the same period.

During Fernandez's absence, Argentina's foreign reserves havetumbled to a seven-year low, the black-market peso has lost 17percent against the dollar, and inflation has quickened to 28percent, the fastest in at least two years. Her disappearance frompublic view is fueling speculation that the government has no planto confront a looming balance-of-payments crisis, according toGuillermo Calvo, an economist at Columbia University in NewYork.

“People have to guess what she's thinking,” Calvo, who was chiefeconomist at the Inter-American Bank for five years until 2006,said in a telephone interview. “There's confusion, and that doesn'thelp investor confidence at all.”

Presidential spokesman Alfredo Scoccimarro didn't return a phonecall seeking comment. In Fernandez's absence, Cabinet Chief JorgeCapitanich has held daily press conferences in which he's saidArgentina will shore up reserves this year.

Capitanich said today that Fernandez is still in charge of thegovernment and rejected any speculation arising from herabsence.

“I can assure you that the president is carrying out her dutiesevery day wherever she finds herself,” Capitanich said during apress conference in Buenos Aires. “She's doing it with the samespirit, creativity, enthusiasm, and passion as always.”

Reserves have been tumbling an average of $1.3 billion per monthin the past year, falling below $29.7 billion yesterday for thefirst time since 2006. Fernandez uses the funds to pay foreigncreditors and finance spending. The government said in September itwill tap a record $9.86 billion of reserves to make foreign debtpayments in 2014.

As the peso falls in the illegal street market to 11.65 pesosper dollar, the government has allowed the official exchange rateto depreciate to 6.825 pesos per dollar yesterday in a bid to makeexports more competitive and close a record gap of 70 percentbetween the two rates.

'Inspire Confidence'

Fernandez's government also faces mounting pressure from unionsto raise public-sector wages as inflation quickened to 28.4 percentin December, according to estimates by private economists publishedby opposition lawmakers. The government said consumer prices rose10.9 percent in the same period.

“It doesn't inspire confidence that the executive recognizesthese problems nor that they have a strategy to deal with them,”Siobhan Morden, the head of Latin American fixed-income strategy atJefferies, said in a telephone interview from New York. “If you'regoing to take tough decisions, you need somebody in charge.”

Sebastian Vargas, a New York-based economist at Barclays Plc,said Fernandez is still in charge and that she has reduced herpublic exposure as her government implements policies ofnegotiating with holdout creditors that she has previouslyopposed.

Argentina formally presented an offer to settle about $10billion it owes to the Paris Club of creditors, 13 years after thecountry's record $95 billion debt default, the spokeswoman for thegroup of creditors said. Paris Club members on Jan. 22 will discussthe offer delivered yesterday by Argentine Economy Minister AxelKicillof to Paris Club Chairman Ramon Fernandez, said ClotildeL'Angevin, the club spokeswoman.

The government has also said it would comply with InternationalMonetary Fund demands by publishing a new inflation index afterbeing the first country to be censured by the Washington-basedlender for misreporting economic data.

“She has always shown herself to be inflexible and that's why,while she's ordering her ministers to resolve these issues, she'smaintaining a low profile,” Vargas said in a telephoneinterview.

The cost of protecting Argentine debt against non-payment forfive years with credit-default swaps has risen 4.23 percentagepoints, the most in the world, since Dec. 19, to 20.96 percentagepoints, according to data compiled by CMA in New York.

“The market is worried that Argentina could enter a period ofungovernability,” Jorge Piedrahita, the chief executive officer atTorino Capital LLC, said in a telephone interview from New York.“Fernandez could find herself in a situation where she can't doanything.”

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