Argentina’s Country Risk Drops to Lowest Levels Since 2018

On Thursday, Argentina’s sovereign risk rate fell by 19 basis points from the previous close, settling at 631 points. During the session, it briefly touched a low of 628 points. This decline coincided with a rise of up to 1.1% in the value of Argentina’s global bonds.

Financial markets in Argentina rallied after the holiday period, leading to further compression in country risk, now approaching the psychological barrier of 600 basis points (bps). This dynamic was welcomed by market participants and the economic team of President Javier Milei.

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Argentina’s Assets on the Rise

The sovereign risk rate’s decline to 631 points marks its lowest level since November 2018. Sovereign debt prices in foreign currency continued to rise, contrasting with the average performance of emerging market debt. Argentina’s global bonds saw daily gains of up to 1.1%, particularly those maturing in 2041, 2046, and 2035.

Equities also performed strongly. Argentine ADRs in the U.S. gained as much as 6.2%, led by Telecom, Cresud, and Loma Negra. On the downside, Edenor, Supervielle, and Mercado Libre recorded losses of 0.6% to 2.7%.

In the local market, the S&P Merval index rose by 1.8% in pesos to 2,597,388.5 points. In dollar terms, the index gained 0.5%, closing at $2,185 using the cash-with-settlement (CCL) exchange rate, nearing its all-time inflation-adjusted high.

Projections and Outlook for Argentina

The stock market rally was driven by strong liquidity and increased demand for shares in industrial and telecommunications companies, with daily gains of up to 7.5%.

The reduction in country risk comes amid expectations of a new agreement between the Argentine government and the International Monetary Fund (IMF), which would result in a new disbursement to strengthen Argentina’s international reserves.

This agreement is supported by positive inflation data, as November’s inflation rate dropped to 2.7%, falling below the 3% monthly threshold for the first time since September 2020.

Additionally, the economic growth of 3.9% quarter-over-quarter in Q3 2024 signals a recovery, moving past the recessionary phase of the country’s GDP.

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ABOUT THE AUTHOR See More
Ignacio Teson
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.
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