Argentine Markets Rally as Debt Outlook Improves
Buenos Aires – The S&P Merval in dollars continued itS upward trajectory for the second consecutive session, while Argentine bonds experienced extended gains amid growing market optimism. This positive movement comes as the country navigates a meaningful capital maturity in January and focuses on bolstering its foreign exchange reserves.
The rally is fueled by increased investor confidence following statements from Economy Minister Luis caputo regarding potential debt financing and anticipated improvements in the country’s risk profile. Despite a current country risk of around 636 basis points,the market is responding positively,extending bond gains and compressing the rate spread. Caputo revealed that banks have offered between US$6,000 and US$7,000 million in financing, with the Treasury carefully evaluating how much too accept, considering potential future market improvements.
“The banks have offered us between US$6,000 and US$7,000 million, and we will see how much of that we take from them. Ther is zero, there is $1,000, there is $2,000, there is $3,000,” Caputo stated. He anticipates a “strong compression of country risk” in the coming months, though pinpointing the timing remains challenging.
Caputo linked the betterment in country risk to the triumphant implementation of the government’s reform agenda,which includes a tax reform,labor reform,the Budget law,and a presumption of innocence law. He expressed optimism that the country risk could converge to 300 basis points, stating, “The most likely thing is to expect that the country risk will converge to 300 basis points.When, I don’t know: a month, two, three or four? We cannot say that.”
He underscored the importance of basic economic factors, adding, “In the medium and long term, the fundamentals always prevail, always.” However, Caputo cautioned against overly optimistic expectations, emphasizing, “We don’t have a crystal ball. but if things are done well,it will go well.” The market’s focus remains on the US$4.2 billion capital maturity due in January and the ongoing efforts to accelerate reserve accumulation.
