Debt securities reach maximum values since the debt restructuring in 2020. In the third round of the week, the country risk is positioned at 800 basis points. To find a similar figure, you have to go back to July 31, 2019, when the indicator stood at 781 basis points. At that time, the presidential race was being fought between Mauricio Macri and Alberto Fernández, a moment of uncertainty that began to overheat the index.
Two weeks later, the polls surprised with the victory of the then opposition and, the next day, the country’s risk shot up from 872 basis points to 1,467 basis points. Just a few days later, it already exceeded 2,500. With a country risk at 800 basis points, the question that arises is: When will Argentina be able to access international markets with single-digit rates?
According to Delphos Investment, “the PAIS risk at 800 points or less brings closer financing opportunities either via REPO or a debt exchange, easing financial requirements in 2025.” The country risk range that financial analysts see to access international markets is between 500 and 400 basis points. This indicator, developed by JP Morgan to measure the difference between the interest rates paid by dollar-denominated bonds issued by the aforementioned countries and US Treasury bondsconsidered “free” of risk.
Simultaneously, the process initiated by the Federal Reserve of reduction of the North American interest rate should not be interrupted either. According to this path, towards the end of next year, successive reductions will leave the rate in the range of 3.75% – 4% annually. In those conditions, The Government could issue debt again after almost 8 years outside the markets at a rate between 8% and 9% annually.
What factors drove the decline in country risk?
The good news did not stop the administration of Javier Milei and Luis Caputo as economy minister. According to 1816 analysts, these were the positive news that encouraged the market:
1. October’s inflation of 2.7% left the inertial level of 4% far away and allowed the decline of the crawling peg from 2% to 1% to be confirmed, to continue on the path of disinflation.
2. The opposition did not get the votes to change the DNU law.
3. Argentina with a leading role in the US after Trump’s victory, improves the country’s conditions at the regional level and better management of the renegotiation with the IMF.
4. The Central Bank continues to buy foreign currency in the MULC.
5. Salary indicators show an improvement in October and November.
Going forward, the Government will face the next Bonares and Globales payment on January 9, where it already has the dollars to do so. The Economy plan points to a voluntary exchange of securities in which a higher yield would be offered in exchange for extending duration.
Not counting the January payments that are already covered, The Treasury will have to face maturities of about US$7,000 millionwhich does not represent an insurmountable obstacle during the next year.
Source: Ambito
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