A recent report from JP Morganthe American bank giant, shook local market foundations in the previous opening this week by recommending investors to dismantle their positions in the “Carry Trade” In Argentina and significantly reduce its exposure to bonds in pesos and pass dollars.
The document, dated June 27, 2025 and entitled “Taking a breath”brand An abrupt change against its April position, When he promoted investing in local currency assetslike Lecaps, before a context of exchange stability and high interest rates. The new recommendation points to growing risks by the “Electoral noise” In the face of the legislative of October, the pressure on reservations by outfits of currencies and the end of the favorable seasonality of the agricultural sector.
What does JP Morgan say about the “Carry Trade”
The report indicates that the pillars that supported the attractiveness of “Carry Trade” –income from agricultural exports and a controlled exchange scheme– They have weakened. Bank analysts emphasize that the agro currency liquidation peak has already passed, while the demand for dollars per tourism, estimated at US $ 3,500 million in the first quarter of 2025, and electoral uncertainty They affect weight stability.
As a result, JP Morgan advises Sell bonds in short -term pesos, such as LECAPS, and take refuge in dollarized assetsanticipating a volatility period in the financial market.
Despite this cautious posture, the bank maintains moderate optimism about Argentina’s medium -term perspectives. It praises progress in deflation, with monthly inflation below 2% in May, and the primary fiscal surplus of 0.8% of the GDP accumulated until May, backed by the elimination of capital controls that reduced structural risks. However, warns that Central Bank reservationsstill strengthened by an IMF disbursement of US $ 13,500 million, they have not achieved robust accumulation, which limits the response capacity to external or internal shocks.
A call from the Treasury Palace
The market reaction was swift. The report generated Tensions at the Treasury Palacewith officials Looking for clarifications With the entity in New York. Operators anticipate turbulence days, with possible increases in financial dollars and falls in bond prices in pesos. The country risk, stagnant around 700 points, reflects doubts about the sustainability of the exchange scheme and the dynamics of the reserves.
The report also questions the official narrative of a stable exchange rate. JP Morgan It highlights interventions from the Central Bank in the futures market for US $ 1,500 million in May, despite the fact that the official dollar did not reach the roof of the band agreed with the IMF. In addition, the end of retentions reduced to soybeans and fall in international agricultural commodities prices have reduced currency income, increasing pressure on the exchange market.
JP Morgan’s analysis emphasizes external risks facing the country. The commercial balance, although positive, fails to counteract the departure of capital, and the dependence of agricultural exports exposes Argentina to fluctuations in global markets. The prices of raw materials, which have shown a bassist trend in 2025, reduce the margin of maneuver of the Central Bank to stabilize the exchange rate without resorting to more aggressive measures, such as higher sales of reserves or adjustments in interest rates.
The political uncertainty that is coming
Another critical aspect of the report is political uncertainty. The October legislative elections could generate tensions if the results weaken to the ruling party, making it difficult to approval of key reforms, such as labor flexibility or the reduction of economic subsidies. This instability, according to the bank, is already reflected in the fall of sovereign bonds in dollars and in a lower confidence of investors in local assets, which reinforces the recommendation to adopt a defensive position.
In relation to the “Carry Trade”JP Morgan emphasizes that The profitability of this strategy has been significantly eroded. Lecaps, which in April offered yields of more than 40% annual, now face more tight margins due to underlying inflation and the lower currency entry. The Bank suggests investors prioritizing assets adjusted by inflation or called dollars until political and economic conditions offer greater clarity after the elections.
Finally, the report highlights the need to maintain fiscal discipline to preserve market confidence. Although it recognizes the achievements in reducing the deficit, it warns that any relaxation in fiscal goals could trigger an adverse reaction in international markets. JP Morgan recommends investors to maintain liquidity and limit exposure to assets in pesos, anticipating an uncertainty environment until macroeconomic foundations are consolidated and electoral noise dissipates.
Source: Ambito
