Moody’s lifts Argentina debt rating in fresh boost to Milei

Argentina’s dollar bonds rose after Moody’s Ratings lifted the country’s credit score, giving the nation its third sovereign upgrade in less than three months in a fresh boost to President Javier Milei. 

Moody’s upgraded Argentina by one notch to ‘B3’ from ‘Caa1,’ with a positive outlook. While the move still leaves the country deep in speculative territory, all three major credit-rating firms now rate Argentina above the highly distressed category, a milestone for a country that spent years among the riskiest sovereign borrowers in global markets. 

“The upgrade is clearly positive and reinforces the macro stabilisation story under Milei,” Murilo Riccini, Head of Andean Equity Strategy at Bradesco BBI, wrote in a report. 

The nation’s notes climbed across the curve in early New York trading, with longer-dated debt up about half a cent, leading gains in emerging markets. As Moody’s was the last of the major firms to upgrade Argentina, “most of the move toward ‘B-/B3’ had already been priced in,” Riccini wrote. 

Argentina’s default risk “has declined materially,” Moody’s said in a statement Tuesday, adding that “macroeconomic stabilisation has advanced beyond the initial adjustment phase into a more durable improvement in credit fundamentals.” The ratings firm also cited strong exports and rising foreign direct investment in energy and mining as key to improved prospects for Argentina’s external position. 

Investment grade target

Milei’s administration is targeting investment-grade status for Argentina by the end of a potential second term in 2031. Economy Minister Luis Caputo said earlier this month that two of the three major ratings firms believe such a path is plausible. 

Days later, Argentina made a payment of about US$4.3 billion in its dollar bonds, split between principal and interest. Caputo has said the government has identified further financing sources that eliminate the need to tap international debt markets for the rest of Milei’s term. 

Moody’s move follows Fitch Ratings’ decision in May to lift Argentina to ‘B1’ and a similar move by S&P Global Ratings in June, with all of the firms citing Milei’s success in restoring fiscal accounts and bringing inflation down from triple-digit levels. Argentina’s sovereign bond spread over their US counterparts now stands at nearly 400 basis points, the lowest in eight years as the country looks to put years of economic crisis and debt defaults behind it.

The upgrades broaden the pool of potential investors that can own Argentine debt. While an initial move out of the highly distressed category can begin to attract new buyers, subsequent upgrades typically expand the universe of institutional investors permitted to hold the country’s bonds.

Milei’s government has maintained fiscal surpluses and relied on local-law dollar debt issuance, repo agreements with international banks and multilateral-backed financing to meet outstanding debt obligations. The Central Bank has also accelerated reserve accumulation, meeting the government’s target with the International Monetary Fund of purchasing more than US$10 billion in foreign currency during the first half of 2026.

At the same time, the government has gradually eased some capital controls and implemented reforms aimed at normalising the country’s monetary and exchange-rate regime.

Moody’s upgrade further strengthens the case for Argentina’s return to international debt markets. Bond spreads tightened materially following the upgrades by Fitch and S&P, with the latter helping drive sovereign risk premium to the lowest levels of the Milei era.

Still, government officials have repeatedly argued that Argentina’s borrowing costs still don’t adequately reflect the country’s improving fiscal and external fundamentals, and should be closer to the 250-300 basis point range.

Moody’s said its positive outlook reflects the possibility of further upgrades as Argentina continues to make structural improvements to its external finances. It cautioned that risks remain ahead of the 2027 presidential election, although it noted that the “range of policy outcomes has narrowed” relative to previous election cycles, increasing the likelihood of policy continuity – long one of investors’ biggest concerns.