Argentina's Fitch upgrade seen opening narrow window for debt sale

Argentina’s latest credit upgrade is fuelling bets that the country will get another shot at tapping international markets after missing a window in early 2026. 

Fitch Rating’s decision to raise the country’s credit score to 'B-' could push spreads back toward multi-year lows reached in January, investors say. It may give President Javier Milei a fresh chance to secure funding before election-driven uncertainty grips markets next year, when he is expected to seek a second term.

“There is a window opening up, but it will be narrow,” said Thierry Larose, an emerging-markets portfolio manager at Vontobel Asset Management. “With 2027 effectively closed by the political calendar, this leaves a real but limited runway, and the upgrade clearly improves the terms on which a deal could be done.”

Seasonal agricultural exports, energy revenues and steady demand for Argentine corporate debt are bringing in a steady flow of dollars, supporting the currency and helping the Central Bank rebuild reserves. It has already purchased more than US$7 billion this year. The government has also raised over US$3 billion in the local market and is working on a large bank loan backed by multilateral lenders.

Argentine bonds rallied after the upgrade, with the 2035 notes – the country’s most widely traded – rising to 76.7 cents on the dollar, pushing yields down to about 9.5 percent. The spread slumped to as low as 515 basis points, the lowest since February 18. 

While that’s still roughly double where Economy Minister Luis Caputo has argued they should trade, investors say Argentina should take the opportunity to come back sooner rather than later. 

“With 2035 bond yields below 10 percent, the issuance window is open. The opportunity is there, and it would be positive for the government to take it,” said Ivan Stambulsky, Latin America economist at Barclays. “Investors are concerned next year will be volatile due to elections, so building a larger liquidity buffer would certainly help.”

The government relied on a US$3-billion bank repo and local placements to meet its debt obligations this year. It is widely expected to cover about US$4.5 billion in July payments without issuing new debt – Argentina hasn’t tapped global markets since it restructured US$65 billion of debt back in 2020 after defaulting for the ninth time.

But the clock starts ticking next year. Argentina faces roughly US$25 billion in payments in 2027, with about US$15 billion tied to local and international foreign-currency bonds.

Milei’s rise to power and strong electoral showing last year triggered a sharp repricing in Argentine debt, with yields on longer-dated bonds falling from distressed levels to an eight-year low in January. The move fuelled anticipation of a comeback to debt markets, which the government ultimately decided against. 

While the gains have stalled amid political noise – from alleged corruption scandals to a decline in Milei’s popularity – investors expect the upgrade to gradually be reflected in spreads, which have also narrowed lately amid a broad move in emerging-market bonds. 

“History shows that once countries move out of 'CCC,' new buyers show up, and they often show up quickly,” said Mauro Favini, a senior portfolio manager at Vanguard. “This is not about optimism. It is about a change in the composition of demand as the investor base broadens.”

The country has received multiple upgrades from major rating firms throughout Milei’s tenure as he gradually restored fiscal accounts and brought inflation down from triple-digit levels. Fitch’s had already done so twice – first in late 2024 to 'CCC' from 'CCC-,' and then again late last year to 'CCC+.' Moody’s Ratings has Argentina at 'Caa1' after two upgrades, while S&P Global Ratings scores it 'CCC+.' 

While one upgrade partially opens the door to some institutional investors, a second would unlock access to a bigger pool of funds whose mandates restrict exposure to CCC-rated debt.

Daniel Chodos, managing partner at Dhalmore Capital, said Argentina’s spreads could initially compress toward 450 basis points. “The window to issue or carry out liability management could open, but it will depend on whether the government is willing to validate rates that would still be relatively high then.”

Caputo has made clear the government is in no rush, having already raised over US$3 billion locally at cheaper rates through short-term placements and leaning on multilateral funding and expected privatisation proceeds. 

“As long as we have access to financing at around six percent to repay debt yielding closer to 9.5 percent, that’s what makes sense,” Caputo said in a TV interview on May 6. “When that option is no longer available, that’s when we will eventually turn to the market.”

Investors say a liability management operation – similar to the one done by Ecuador earlier this year – would help ease the country’s debt burden. They also note the government is operating from a position of relative strength, with multiple financing options on the table – a rare luxury for Argentina.

“We would frame it less as urgent and more as opportunistic,” Vontobel’s Larose said, adding his base case is that Argentina returns to markets in the second half of 2026. “The kind of deal you do because the window is open, not because you have no choice.”