The presidency of Javier Milei closed a great first semester with important achievements in economic and political matters. On the economic front, he maintained twin surpluses (fiscal and commercial), accumulated US$11 billion in net reserves and lowered inflation to its lowest level in two years. Meanwhile, on the political front, he managed to keep his popularity high and achieved the approval of the Bases law in Congress.
For the second half of the year, the government will likely continue to move forward on its path to correct imbalances. However, it may need to review some parts of the current economic program, in particular the exchange rate scheme of fixed devaluation at 2.0% per month.
This context opens up an attractive range of opportunities for the Argentine investor. Despite the significant increases accumulated this year, Argentine assets still have a lot of potential for a normalization of the economy.
In this note, I summarize my favorite investment alternatives for 2025.
Investments: Carry trade with dollar-linked (but also with CER)
In the last two months, the financial dollars had a significant rebound so their gaps against the official dollar rose by around 50% from levels around 20%. We see in this increase an opportunity to buy assets in pesos linked to the official dollar.
In the medium term, the Government aims for a unification of the exchange rate, where the dollar will be freely accessible and will have a single price for the entire economy. If this happens, the official dollar will recover the almost 50 point gap it has today against the CCL and the MEP.
There are several reasons that make a unification likely in the coming year. The government itself has confirmed that Argentina is moving towards a scheme of free currency competition and that it will lift the stocks as soon as it has finished cleaning up the BCRA’s balance sheet through the accumulation of reserves and the elimination of remunerated liabilities.
Under such a scenario, the assets tied to the official dollar (dollar-linked) will offer an extraordinary return measured in free dollars. As an example, under an exchange rate unification the TV25 bonus By March 2025, it would have an extraordinary direct return of 25% in dollars.
Mutual funds are our favorite vehicle for this investment, especially those with a higher proportion of corporate credit holdings.
However, this strategy can also be replicated with the bonus CER TZV25 linked to inflation with maturity in June 2025. Here, the idea is that financial dollars will lose ground against the rest of the prices in the next twelve months.
Investments: Sovereign bonds and BOPREAL 2026
The Argentine Treasury dollar bonds they had a great performance So far in 2024: they gained 35% in the year. However, in the last two months this trend reversed and accumulated a drop of 8%.
At these prices, Argentine fixed income offers rates of around 21%, which represents a very good risk/return ratio. These rates represent a premium of almost 10 points against bonds from comparable countries (whose yields are around 12%). If they converge at levels around 15%, Argentine bonds would offer returns in dollars of between 30% and 40% in the next twelve months.
With the country risk at 1,400 bp, prices indicate high probabilities of occurrence for a default aggressive in the medium term. Given the government’s willingness to pay and the significant progress made in correcting macroeconomic imbalances, a credit event of this magnitude seems unlikely to us. Even if the government were forced to exchange its dollar debt, it would most likely occur on terms that would be friendly to Argentine bondholders.
With this in mind, there is a very strong thesis for incorporating holdings in Argentine sovereign bonds. In specific names, our recommendation is to buy a mix of GD30 and GD35. For somewhat more conservative investors, there is also appeal in the BOPREAL BPY26 expiring in May 2026.
Investments: Long-term fixed rate
Finally, the TO26 bonus Fixed-rate bond maturing in October 2026 offering a Monthly Effective Rate of 3.6%.
With inflation expected to fall to monthly levels around 3.0% by the end of the year, this bond offers the opportunity to lock a high nominal rate for the next two years.
Fixed Income Strategist at Cohen Aliados Financieros.
Source: Ambito
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