Argentinian Bonds Plummet up to 5%, and Country Risk Jumps 21% in 4 Days

The leading S&P Merval index in Buenos Aires falls 3.2% to 1,520,781.18 points, with all stocks down by up to 5%.

Written by: Ignacio Teson • Thursday, June 6, 2024 • 1 min read

• Last updated: Thursday, June 6, 2024

The leading S&P Merval index in Buenos Aires drops 3.2% to 1,520,781.18 points.

Rising political tensions between Javier Milei’s government and Congress, following the opposition’s preliminary approval of a pension increase, are creating an erratic stock market environment due to speculative portfolio adjustments.

The new pension formula would increase spending by approximately 0.4 percentage points of GDP. This increase is opposed by the ruling party and is expected to be vetoed for threatening fiscal balance, according to Milei. “There is no possibility that the government can cover the cost of this increase because it does not have the resources,” stated Chief of Staff Guillermo Francos in a radio interview.

In this context, the leading S&P Merval index in Buenos Aires falls 3.2% to 1,520,781.18 points, with all stocks down by up to 5%, following a 0.7% drop in the previous session and a 4.7% plunge on Tuesday. A more cautious attitude prevails among traders as they wait for the easing of rising political tensions and uncertainty, opening the door to a more decisive correction phase.

Argentine stocks on Wall Street are also down on Thursday, with losses of up to 4.6%, led by BBVA, Grupo Financiero Galicia (-3.3%), and Banco Macro (-3.4%). Meanwhile, the only stocks gaining are Mercado Libre (+1%) and Bioceres (+0.9%).

Amid renewed political tensions, Milei is pushing for the Legislative Power to advance the vote on the so-called Bases Law and the fiscal package that has already passed the Senate. This impacts the dynamics of sovereign bonds, all of which are declining. The most significant drops are seen in Bonar 2035 (-4.8%), followed by Global 2038 (-4.7%), Bonar 2038 (-4.2%), Bonar 2029 (-4%), and Global 2030 (-4%). Consequently, the country risk rises by 77 points to 1,587 units (+5.1%).

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ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.