UPDATE 1-Argentina looks to attract wary investors with dollar-linked bond

(Adds dip in OTC bonds)

BUENOS AIRES, Oct 6 (Reuters) - Argentina is looking to gain favor with wary investors through a dollar-linked bond with the aim of taking pressure off the battered peso amid a grueling economic crisis.

The new instrument comes as part of a series of new measures by the government and the central bank, including a managed float of the peso currency as it seeks to adapt its monetary policy amid sharpening economic turmoil. Argentina also temporarily cut export taxes on industrial, mining and agricultural products to boost its international reserves.

Argentine over-the-counter bonds, meanwhile, dipped an average 1.0%, traders said, and country risk rose 15 basis points to 1,365. The peso opened 0.09% weaker at 77.09 per dollar.

The trading volume of the new dollar-linked bond will reflect confidence in the policies of President Alberto Fernández as his administration looks to stimulate peso savings and avoid further currency devaluations, traders said.

“Dollar-linked securities are imperfect substitutes of USD assets,” Bank of America said in a recent report for clients.

The government is expected to announce the results of the action for about $500 million worth of the dollar-linked bond later on Tuesday. The notes will mature on Nov. 30, 2021.

A mission from the International Monetary Fund is due to begin meetings in Buenos Aires on Tuesday as the government seeks a new program to replace a failed $57 billion facility.

“The objective is to know in greater detail the authorities’ plans and priorities and to have a deeper knowledge about the socio-economic situation,” an IMF official told Reuters. “The mission is in listening mode.”

Argentina is headed for an economic contraction of about 12% this year, which would be the third straight year of recession. The official peso has sunk 22.2% so far this year, widening the gap with the black market currency to a historic 94.8%. (Reporting by Jorge Otaola and Eliana Raszewski; writing by Cassandra Garrison Editing by Marguerita Choy)