Argentina still US$2.4 billion short for January bond payments

With just five trading days left ahead of a crucial January 9 deadline, Argentina’s Treasury only has US$1.9 billion of the US$4.3 billion it owes despite recent efforts to bolster the country’s stash of dollars.

Economy Minister Luis Caputo still has options though as he looks to scrape together the rest. They include a possible repurchase agreement – effectively a loan – with Wall Street banks or potentially tapping Argentina’s US$20-billion swap line with the US Treasury Department. For now, Caputo has downplayed the likelihood of selling bonds abroad in January.

Argentine authorities on Tuesday took steps to prepare a repurchase agreement, with the Economy Minister executing a debt swap with the Central Bank, one element of the government’s previous repos with banks. 

Bond investors remain broadly optimistic that the January 9 payment — which includes principal and interest — will be made, with Argentina’s global bonds maturing in 2030 trading at around 85 cents on the dollar, up 44 percent since September, according to data compiled by Bloomberg.

With the looming maturity, President Javier Milei’s government must either step up its dollar purchases, secure a bank loan or deploy one of the other tools that Caputo has pitched. That task is being complicated by a market that remains concerned about the government’s demand for dollars and any impacts on the peso.

“The issue is there are only five trading days left. Six months ago, we would have seen this as a small amount relative to the trade surplus,” said Juan Manuel Pazos, chief economist at local brokerage One618. “But with five trading days to go before the maturity, it looks like a pretty large share of the FX market’s daily volume,” Pazos said. 

Argentina’s Economy Ministry and Central Bank declined to comment.

The peso has been trading at around 1,450 against the dollar recently, with daily swings of less than one percent since November 26. Argentina’s government since the start of its term in 2023 has used the exchange rate as a key anchor for domestic prices as it fights inflation.

Argentine officials in early December accelerated their accumulation of dollars using two main channels: a limited hard-currency debt sale of less than US$1 billion as well as regular purchases in the official market. That quickly raised the Argentine Treasury’s existing dollar holdings, with balances climbing from less than US$100 million on December 4 to about US$2.1 billion most recently, according to figures by the Central Bank. 

One last resort for the January 9 maturity could be the BCRA, but its net reserves are effectively zero or even negative, according to estimates by different private consultants, which is why the Treasury needs to build up its deposits.

“The news flow out of Argentina is uniformly positive,” if one overlooks the BCRA’s net reserves and the Treasury’s US$1.9-billion dollar deposit at the Central Bank, said Walter Stoeppelwerth, CIO at local brokerage Grit Capital Group, in a report to clients. 

Recent changes to the country’s foreign exchange framework could make it easier to grow dollar reserves starting next month. Under the new rules, the BCRA will index its crawling peg to the prior month’s inflation rate rather than the previous rate of one percent a month, implying faster nominal depreciation. Argentine inflation has been trending above 2% since August.

Alongside the shift, the Central Bank outlined a more structured approach to buying dollars and building reserves, including limits around day-to-day interventions aimed at reducing uncertainty about how and when officials will step into the market while balancing exchange-rate stability with debt payments.

The BCRA in a statement on Monday framed the latest shift as the start of a programme to support growth, keep prices stable and rebuild liquid reserves. The Central Bank said it will balance monetary discipline and reserve accumulation. 

Still, that might prove challenging, Pazos said. “They’ll have to buy a lot every day to get there or borrow from someone,” he said, referring to the US$2.4 billion Argentina’s Treasury remains short of.