The demand for dollar bonds It has remained very firm since the Government won the legislative elections by a wide margin and yesterday the upward trend accelerated. As a result, the country risk It returned to the floor recorded in Javier Milei’s management of 560 basis points. That value was touched in the first days of January, but from then on there was a sharp deterioration in the prices of Argentine assets.
The renewed optimism of investors is related to the greater strength of the ruling party, which eliminated the risk of impeachment with its greater legislative presence and gained the ability to advance structural reforms. But the weakened position in which Kirchnerism was left also weighed significantly, something that was celebrated by the markets.
Dollar bonds registered additional increases of around 3% yesterday and it seems a matter of days before country risk converges to the area of 500 basis points. Prior to the legislative election, less than a month ago, this indicator had reached 1,100 points, coinciding with the weakest moment in bond prices.
Now The strongest increases are concentrated in the longest titles, from ALD 35 onwards. On the other hand, those with shorter maturities, 2029 and 2030, had led the increases in the days after the elections.
One of the additional reasons that weighed positively on the bonds were the signals given by the Minister of Economy in New York. In meetings with investors, Luis Caputo confirmed that the Government’s idea is to go out repurchase debtwhich would put a much firmer floor on the price of the bonds.
There are still no further details on how this debt buyback operation would be carried out or where the resources would come from to move forward. However, the strong support of the North American Treasury and the commitment of international banks to provide financing to Argentina today represent sufficient guarantee for investors.
The international context is also favorable for Argentine risk to continue reducing. To the point that JP Morgan predicted that it could soon fall to levels of 400 to 420 basis points. They would be levels as low as those Mauricio Macri had in the early days of his administration, back in 2016.
One of the issues that worries the market is that the Government manages to accumulate reserves to strengthen the Central Bank and also as reinsurance for debt payment. For now there is no further news on this topic. It is assumed that as more dollars come in, especially starting in the second quarter of next year, there will be increasing interventions both of the Treasure as of BCRA for get more dollars.
The Federal Reserve’s second rate cut at the end of October made it clear that the objective is to continue along that path, lowering the cost of money. It is even possible that a new reduction will occur before the end of the year and others are expected for 2026. As a result, the yield on North American Treasury bonds fell to levels of 4% annually.
The decrease that occurred in this reference rate for global investors leads to the search for options in the debt market that provide more performance, although this also requires assuming more risk.
Meanwhile, Those that continue to take advantage of the reduction in country risk and the greater appetite for Argentine debt are companies. The placements of Tecpetrol and YPF just a week after the elections are now joined by Pampa Energía and TGS, which also seek to secure long-term financing in dollars.
For the Government, the turn to finance itself in the markets has not yet come, but it would achieve it shortly if the trend remains firm as it has been until now.
These placements are also good news because they contribute dollars to the local market at a time of “lean times” in the agricultural sector. Companies are obliged to settle foreign currencies in the local market, which adds supply and keeps the exchange rate under control, pending the receipt of the liquidation of the fine harvest at the end of the year.
