Argentina's Economy Minister, Luis Caputo, has indicated a reluctance to return to international debt markets currently, despite investor advice to the contrary. He believes the country should be able to borrow at much lower levels, closer to 250 to 300 basis points over US Treasuries, to reflect Argentina's fiscal adjustment and macroeconomic stabilization. Currently, bond spreads are near 600 basis points, leading the government to rely on reserve purchases and local financing sources. Investors, however, suggest that an opportune window to issue bonds, when spreads hit an eight-year low, was missed earlier in January.
Caputo's long-term vision includes Argentina achieving investment grade status by 2031. This ambition comes amidst Fitch Ratings upgrading Argentina's credit score to B-, six notches below investment grade, the highest level since 2019. This upgrade broadened the pool of eligible investors for Argentine sovereign and corporate debt, as many institutional funds could not invest in CCC-rated instruments. The country's benchmark 2035 bonds rallied, with yields dropping to 9.66 percent.
Argentina faces a significant foreign-currency debt test in 2027, with over $23 billion in principal payments and more than $32 billion including interest, coinciding with President Javier Milei's expected re-election bid. Despite this, investors are growing more confident in Argentina's ability to manage this debt wall due to improved fiscal discipline and economic stability under Milei's administration. The government has utilized local-law dollar bonds, repo transactions, and multilateral-backed financing, raising over $3 billion through May this year in cash-market dollar issuance under local law, as a means to meet hard-currency needs without resorting to expensive international bond issuance. Moody's Ratings does not see a return to global capital markets as essential for Argentina's debt sustainability, anticipating export growth from late 2027 and 2028.
