Argentine bonds collapse and the debt risk index is triggered

Argentina is going through powerful financial turbulence. The country risk prepared by the JP Morgan Bank, which measures the differential paid by the bonds of a country above the United States, closed this Thursday at 1,453 basic points, 16.6% more than on the eve. The index shooting is the best indicator of the loss of investors confidence in the strength of the Government of Javier Milei to carry out the fiscal adjustment that would allow him to fulfill his external commitments. In January of this year, the Argentine country risk had touched the 500 points. Although still high, it reflected the interest of the markets in the economic project of the extreme right in Argentina. Eight months later, the panorama has changed dramatically.

Argentine foreign currency titles collapsed on Thursday to 14%. The Central Bank, meanwhile, had to sell 379 million dollars of its reserves to contain the dump of the exchange rate, which for the second consecutive day reached the ceiling of the flotation band of 1,474 pesos established by the Government. On Wednesday, the issuing entity had already disbursed 53 million dollars, in the first intervention from the rescue of 20,000 million granted by the International Monetary Fund (IMF) last April. The official retail dollar sold in banks closed at 1,509 pesos per unit, almost 1% above the eve. Financial dollars, which float without state intervention, rose to 1,564 pesos, almost 4% more than Wednesday. The actions fell about 9% in the Buenos Aires Stock Exchange.

The turbulence are increasingly strong since September 7, when Milei’s party suffered an unexpected beating in the legislative elections of the province of Buenos Aires. The fear of the markets is that the result is repeated in the nationals of October 26. The Government hoped to reach those elections in a good way, enough to add fire power in Congress, where it is in the minority since the beginning of the management, in December 2023. Without those votes, the doubt is how it will make to sustain the fiscal surplus, accumulate reservations and advance in the structural reforms it promised.

At the start of the day, the Government tried to take calm on a day that was agitated. The lower house had lying on Wednesday the veto of Milei to a university financing law and another that gives more resources to pediatric care. The Senate did the same this Thursday with a law promoted by the governors that reduces the discretion with which the Casa Rosada distributes the funds that correspond to the provinces. “We are never going to have problems going to buy pesos, for the consistency of the plan,” said Manuel Adorni, Milei spokesman, with a reference to the intervention that the Central Bank would later make to hold the currency.

Argentina has international reservations for 39.4 billion dollars, according to the last figure informed by the Government. But of that total, only about 6,000 million would be freely availability, that is, suitable for selling in the change market. The Minister of Economy, Luis Caputo, said after Black Thursday that “there are enough dollars for all.” “We are not going to move the program. We are going to sell to the last dollar on the roof of the band, ”warned the minister.

Milei refused to treasure reservations when he could still, on the grounds that an increase in the exchange rate would negatively impact his war against inflation. Now that he needs them, he has the elections around the corner and his hands tied. Not only because markets no longer hide their tiredness. The “dialoguist” opposition has taken away his support, as evidenced in the successive cancellation of three of his legislative vetoes for an overwhelming majority of votes. The governors have turned their backs on Milei’s insistence to present their own candidates in their territories. Part of the PRO, the party of former president Mauricio Macri that was decisive in the governance of the first year of government, has moved away victim of presidential destroying.

The debt maturity calendar that the South American country has ahead does not help to clear the fears. According to a report by Banco Barclays, which recalls that Argentina does not have access to external credit, it has until December maturity for 2,000 million dollars, 12,000 million in 2026 and 19,000 million in 2027.

The doubt is now if Milei can maintain after the elections the exchange anchor and the monetary tourniquet that applies as a strategy against inflation. In addition to the tension that supposes about the reserves of the Central Bank, the model needs interest rates in very high weights, today around 50%, to discourage the dollarization of savings. The combination of pesos drought, overvalued exchange rate and rates by clouds ended up impacting economic activity.

INDEC, the Official Statistics Office, on Wednesday reported that GDP fell 0.1% in the second quarter of 2025 with respect to the previous one. It was the corollary of a descending ladder initiated in mid -2024 that, if it is not reversed, sooner or later it will become a recession.