Argentina debt risk index drops again as default fears recede

Published 10/29/2024, 11:13 AM
Updated 10/29/2024, 11:18 AM
© Reuters. Argentine one hundred peso bills are displayed in this picture illustration taken September 3, 2019. REUTERS/Agustin Marcarian/Illustration/File Photo

By Jorge Otaola

BUENOS AIRES (Reuters) - Argentina's country risk index, a measure of the premium investors demand to hold local bonds versus equivalent U.S. debt, dropped under 900 basis points on Tuesday as investors grow more bullish on pro-market libertarian President Javier Milei.

The risk index - near 2,500 a year ago - is at its lowest level since the middle of 2019, just before Argentina plunged into a major financial crisis that tanked markets. Local bonds, long mired deep in distressed territory, have surged this year.

Milei, an outsider economist who won a shock election late last year, has turbocharged local markets with investor-friendly policies and a tough cost-cutting drive that has helped overturn an entrenched fiscal deficit and improve the state's finances.

"Another great day for markets," said analyst Salvador Di Stefano. "With country risk below 900 points, it should be acknowledged Argentina is back on its feet, despite everything."

Positive signals include the fiscal surpluses, slowing monthly inflation, backing from international lenders, rising central bank reserve accumulation and strong take-up of a scheme to bring dollar deposits back into the formal financial system.

Milei's austerity has, however, pushed up poverty levels and deepened a recession, though his government argues that it's a necessary tonic to cure longer-term economic imbalances - an argument many voters seem willing to accept for now.

A closely watched opinion poll on Monday showed that Milei's popularity jumped sharply in October after sliding the month before, an important boost to the government's ability to get things done given its small share of the seats in Congress.

© Reuters. Argentine one hundred peso bills are displayed in this picture illustration taken September 3, 2019. REUTERS/Agustin Marcarian/Illustration/File Photo

"This will be another boost for assets, generating increases of two to three dollars in our target prices for dollar bonds," said local consultancy Max Capital.

"In the short term, spreads begin to look tighter, with practically no risk of default until 2027."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.