Argentina: ADRs and Dollar Bonds Drop Amid Uncertainty

n this context, the country's risk premium rose by 37 points, or 2.5%, closing at 1,525 basis points.

Ignacio Teson•Wednesday, June 12, 2024•2 min read

The leading S&P Merval index fell by 2% to 1,544,869.310, following a 3.8% rise in the previous session and a 24.8% increase in May.

Argentine stocks and dollar-denominated bonds traded in New York fell by up to 4% on Tuesday, June 11, due to profit-taking amid investor uncertainty ahead of the Senate’s consideration of the Bases Law and the fiscal package. Consequently, the country’s risk premium rose above 1,500 basis points.

In the Buenos Aires stock market, the S&P Merval index dropped 2.1% to 1,544,869.310, after climbing 3.8% in the previous session and gaining 24.8% in May. The leading stocks with the biggest declines were: Irsa (-3.4%), Telecom (-3%), and Aluar (-3%).

ADRs saw declines of up to 4.1%, led by Banco Macro, followed closely by Grupo Supervielle (-4%) and Pampa Energía (-3.3%).

With a very tight vote expected, according to analysts’ estimates, President Javier Milei could secure Senate approval for his proposals on Wednesday. One hypothesis is that both stocks and bonds had an excellent day on Monday because the government had narrowly secured the necessary votes to generally approve the Bases Law and the fiscal package. We may have seen a short-term support. However, any event that substantially changes the perception of the country could cause the Merval to decline in valuation.”

Additionally, last week the House of Representatives passed a new pension adjustment formula to replace the mechanism imposed by Milei by decree. This new formula, which must be approved by the Senate, is strongly opposed by the government as it affects the state coffers.

In another development, Economy Minister Luis Caputo announced in a speech that Argentina will start negotiations with the IMF for a new program on Thursday, which could involve new disbursements.

Sovereign bonds fell by up to 3.1%, led by declines in the Global 2038, Global 2046 (-2.8%), and Global 2041 (-2.7%).

In this context, the country’s risk premium rose by 37 points, or 2.5%, closing at 1,525 basis points, according to JP Morgan’s measurement.

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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.