Bank of America Names Argentina as its Top Pick in Latin America.
In its weekly Global Emerging Markets outlook, the bank reaffirmed its overweight position in Argentina’s external sovereign bonds.
Quick overview
- Bank of America is overweight on U.S.-dollar sovereign bonds, with Argentina as its top investment opportunity.
- The bank cites Argentina's disinflation, commitment to fiscal balance, and reform agenda as key positive factors.
- While bond yields are nearing levels for potential market re-access, risks such as global aversion and governance challenges remain.
- BofA also shows interest in Brazilian bonds and high-quality Mexican bonds, while maintaining a constructive view on the Chilean currency.
In its latest Emerging Markets report, Bank of America said it is overweight U.S.-dollar sovereign bonds and maintains Argentina as its top investment opportunity, arguing that a return to international markets could trigger a “virtuous circle” of declining yields.
In its weekly Global Emerging Markets outlook, the bank reaffirmed its overweight position in Argentina’s external sovereign bonds, noting that current yields remain high relative to the country’s credit rating and that future credit upgrades are likely. BofA highlighted Argentina’s sharp disinflation, the government’s strong commitment to fiscal balance, high willingness to service external debt, and the implementation of an ambitious microeconomic and deregulation reform agenda as key drivers behind its positive view.
The bank added that bond yields are approaching levels that could make market re-access feasible. However, it also flagged risks, including global risk aversion, low international reserves, potential fiscal slippage through legislation, governance challenges in Congress, declining presidential popularity amid economic pressures, and social unrest. Risks that have recently eased include support from the United States Treasury, improved fiscal discipline, upcoming eurobond repayments, rising reserves, stronger political alliances, and progress on structural reforms.
Latin America positioning
BofA said it remains interested in receiving Brazilian bonds and maintaining short positions in USD/BRL, while in Mexico it favors high-quality bonds, expecting more rate cuts than currently priced in. In Argentina, it prefers local BONCER bonds due to favorable real yield dynamics. In Chile, it maintains a constructive view on the currency but has closed its receiver position, citing limited room for further rate cuts and the risk of future hikes.
“Externally, Argentina remains our top pick, as regaining market access should trigger a virtuous cycle in which lower yields reinforce further declines in yields,” the report concluded.
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