US Signals Limited Aid to Argentina, Cooling Bond Market Rally
WASHINGTON – Teh United States has clarified its potential financial support for Argentina, signaling it will likely offer a swap line but will not directly invest capital into the struggling South American nation. The proclamation,made by a US official,tempered initial optimism that had driven up Argentine bond prices earlier this week.
The shift in tone follows a period of speculation regarding the extent of US assistance. while the US had previously outlined three potential options – a $20 billion swap line, direct debt purchases, and currency buying – the official indicated a preference for the swap line mechanism. This progress impacts investors holding Argentine dollar bonds, which have experienced six consecutive days of decline, and casts uncertainty on Argentina’s immediate economic outlook as it seeks financial stabilization.
Earlier this week, initial reports of US willingness to “help Argentina” spurred a rally in bond prices. Though, the official, speaking to CNBC, quickly walked back the suggestion of a direct capital injection, stating, “We may give them a swap line, but we will not pump money in Argentina.”
The US had considered a range of interventions, including a potential $20 billion currency swap to bolster Argentina’s reserves.A swap line would allow Argentina to access US dollars in exchange for Argentine pesos, providing short-term liquidity. Direct debt purchases or currency buying were also floated as possibilities.
On Wednesday, the US official spoke with Argentine Minister of Economy Luis Caputo, who is expected to travel to Washington in the coming days to discuss ”options for providing financial support.” The narrowing of potential aid options suggests the US is prioritizing a less interventionist approach, aiming to provide Argentina with access to dollars without directly injecting capital into the economy.
As of today, Argentine dollar bonds due in 2035 have decreased by 0.3 cents to 51.45 cents per dollar, reflecting investor reaction to the revised US stance.
