(Adds yield set, background, quotes from analysts, market reaction)
BUENOS AIRES/LONDON, June 19 (Reuters) - Argentina has offered a 100-year bond in U.S. dollars, the finance ministry said on Monday, only just over a year after the nation emerged from default.
Investors said there would be appetite for the bond with a yield of 7.9 percent, given the low yields elsewhere in the fixed income market and the need for pension funds to lock in long term returns, but the move came as a surprise given Argentina only last year ended a decade-long dispute with creditors over its 2001 default.
"It's awfully premature for Argentina to issue 100-year bonds," said Jorge Piedrahita, CEO of Puma Investments, who said he would "sit on the sidelines" for this bond. "When you look back in history I'm not sure we can find a 20-year period where Argentina has not defaulted."
The finance ministry tweeted a confirmation of the 100-year-bond issuance, first reported by Thomson Reuters IFR, which is expected to be priced later on Monday, but the ministry did not give details on the amount of bonds to be sold.
The issuance also came as a surprise as Finance Minister Luis Caputo has said Argentina would meet the rest of its financing needs in non-dollar currencies after selling $7 billion in dollar bonds in January. The country plans to sell $10 billion in foreign currency bonds this year. Argentina needs to finance a fiscal deficit of 4.2 percent of gross domestic product this year.
Argentine sovereign bond yield spreads over US Treasuries widened 6 basis points, the widest in a month at 412 basis points.
Citigroup Inc and HSBC are acting as lead book runners on the deal, while Nomura Securities and Banco Santander are co-managers.
Such long-term bonds are unusual in emerging markets. Mexico issued a 100-year bond in 2010, and Chile's Embotelladora Andina sold one in 1997, according to IFR.
Since taking office in late 2015, Macri has implemented several market-friendly reforms to deliver on his promise of normalizing Argentina's economy after years of heavy state intervention and non-payment of international debt obligations under the previous government.
He ended a decade-long dispute with creditors that allowed it to re-enter global credit markets last year, but Argentina lacks an investment grade rating. S&P and Fitch rate the sovereign a B with a stable outlook, while Moody's has the debt at B3.
"Macri still has his heart in the right place, but now he has to actually implement his plan," said Nathalie Marshik, emerging markets sovereign analyst at Oppenheimer & Co. "I have no doubt there is market demand. But you have to ask yourself the question - it's a 100-year bond for a B3 or single B rated country."
The country sold 400 million Swiss francs ($410.64 million)in debt in March, and Caputo said on June 7 that Argentina would issue peso and euro bonds later this month. ($1 = 0.9741 Swiss francs) (Reporting by Luc Cohen in Buenos Aires, Dion Rabouin New York and Sujata Rao and Claire Milhench in London; Writing by Caroline Stauffer; Editing by Clive McKeef)