What can happen if the country risk breaks the floor of 1,100 points

Optimism was also reflected in Argentine stocks listed on the New York Stock Exchange (ADR). The papers of Grupo Financiero Galicia led the round with a rise of 3.7%, followed by BBVA (+3.4%), YPF (+2.6%) and Mercado Libre (+2.5%).

Without activity in the local market due to the Day of Respect for Cultural Diversity holiday, The international financial movement showed positive numbers for Argentina, with the country risk seeking to pierce that barrier.

The Government closely follows this indicator, which is key for it to return to international credit markets. However, Analysts point out that there is still a long way to go to reach “reasonable” levels: Currently the index is almost triple the Latin American average.

Although this Friday the local market had no movements, Sovereign debt bonds that operate abroad were quoted, which had a recovery of 1% on average. This had a direct impact on country risk, an index prepared by JP Morgan and which measures the difference paid by US Treasury bonds (considered the safest assets in the world) compared to the rest of the countries. As its name indicates, when a country is riskier, it has to pay a higher rate when seeking financing in the market.

The indicator lost 17 units and stood at 1,109 basis points (-1.51%). That is, as ten-year Treasury bonds are currently trading at a rate of 4.1%, to finance itself Argentina has to pay an annual interest rate of 15%.

The Government continues to try to close some alternative form of financing and advanced a Repo for between US$3,000 and US$3,500 million to guarantee capital payments for January 2025, although there is no official confirmation in this regard.

Argentina has the fourth highest Country Risk in all of Latin America

Argentina has the fourth highest index in all of Latin America, although in the last year it managed to drop two notches. Ahead are Venezuela (with a country risk of 20,253 basis points), Bolivia (2030 bps) and Ecuador (1165 bps). In contrast, the Latin American average is 427 basis points, and even neighboring countries are much lower.

For example, in Brazil the indicator is located at 198 basis points, in Peru it is 153 basis points, in Paraguay it is 152 basis points, Chile follows with 113 basis points and the best positioned is Uruguay, with 88 basis points.

In any case, currently the country risk reaches values ​​that have not been observed since the debt exchange of September 2020.

At that time, the country risk collapsed by half: it went from 2,147 to 1,104 basis points in just one day. However, these values ​​did not last long on the screen, since after a few days the indicator trended upward again. More steadily, the last time an index was seen at 860 basis points was the day before the August 2019 primary election.

After Alberto Fernandez surprised with a large victory in the presidential race, the next day the country’s risk shot up to 1,460 basis points and, two weeks later, it already surpassed the 2,500 barrier.

This was due to the recovery of sovereign bonds. At the end of December of last year, a few days after Javier Milei assumed the presidency, Bonar maturing in 2029 was trading at US$38.09.

This Friday it closed at $70, which meant an increase of 80% so far this year (8% in October alone). While Global 2030 rose 55.2%, from US$40.10 to US$63.85 (7.1% scored in the first ten days of the month), to name some of the most in-demand assets in the market.

Dollar bonds accumulate another good week in a context where the Central Bank continues to buy dollars in the exchange market and the government manages to ratify fiscal discipline by imposing the veto of the University Financing Law.

The good performance of the monetary authority in the exchange market helps calm any exchange fears, given that The recomposition of reserves is perceived by the market as the main concern of the program.