Argentina sold local-law dollar bonds in a move seen as a first test of a planned comeback to global credit markets as Javier Milei’s administration seeks funding to meet hefty sovereign debt payments coming due next year.
The new so-called Bonar bond is due in November 2029, with a 6.5 percent semi-annual coupon and was priced to yield 9.26 percent, according to a statement from the Economy Ministry on Wednesday. Demand for the US$1-billion sale reached US$1.42 billion, and the sale’s cash value allocation was US$910 million.
The deal is seen as a dry run for the country’s eventual resumption of overseas borrowing, as Milei’s government moves toward issuing globally for the first time since Argentina restructured its debts in 2020. The operation was also seen as key for the country to secure dollars to meet a US$4.5-billion January 9 bond payment – and a similar one due in July – without draining its thin foreign reserves.
Yields on the new notes were higher than the sub-nine-percent levels Economy Minister Luis Caputo had signalled he expected. Yields on existing 2029 Bonar notes are currently at 11.4 percent.
Ahead of the sale, Caputo said the government saw it as a first step toward regaining market access, adding he expected future deals to come at better pricing as there is “enormous potential” for country risk to drop from current levels.
Caputo also said the administration has received bank proposals totalling US$6 billion to US$7 billion, which could help eventually cover the remainder of January’s repayment needs.
The last time Argentina had sold hard-currency debt – excluding the 2020 restructuring – was under former president Mauricio Macri. In May, Argentina’s Treasury placed a five-year, peso-denominated bond open to international investors subscribing in US dollars – another step toward reopening market access.
“This is still a successful transaction – something we haven’t seen since the Macri administration – and a good way to gather the dollars ahead of the maturity,” said Juan Pazos, chief economist at local brokerage One618. “It’s a first step toward regaining market access, but just the first in a path that still requires meaningful progress – through congressional reforms and foreign reserves accumulation.”
Momentum
Officials were quick to seize on positive momentum after President Milei’s resounding victory in October’s midterms. Sovereign yields have fallen toward 10 percent, or roughly six percentage points over US Treasuries – close to levels Caputo has privately signalled would be acceptable for a global issuance, according to people familiar with the matter.
Wednesday’s deal was structured under local law to avoid triggering the so-called "Guzmán Law,” which requires congressional approval for foreign-law hard-currency bonds. Local brokers had widely expected strong demand for the notes, citing the strong post-election appetite for corporate and provincial issuances, which topped US$5 billion since the vote, compared with just US$130 million in the three months prior, according to data compiled by Bloomberg.
Some analysts noted that the government needs to finance most of its January debt payments from sources beyond Wednesday’s dollar bond auction. The gap between Treasury and Argentine yields may not shrink much either in the short term.
“We do not see much room for spread narrowing from current levels given that the proceeds of the issuance are still well below what is needed to settle the January maturities,” says Ramiro Blazquez, a Latin America strategist at StoneX. “The government will need to source at least US$3 billion with a very expensive repo with international banks.”
by David Feliba, Bloomberg
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