Ecuador’s splashy return to global credit markets is being seen as a good portent among investors who are eagerly awaiting Argentina’s own comeback from years of being cut off from international financing.
Ecuador sold US$4 billion of bonds on Monday – its biggest-ever global offering and its first such sale since a debt restructuring in 2020. The deal met with enough demand for the nation to obtain its lowest borrowing costs in years. Moody’s Ratings followed with an upgrade to the country’s credit score, which compressed yields further.
The positive reception was both a vote of confidence for Ecuador, which will use proceeds to repay existing debt, and the latest sign of appetite for high-yield emerging-market credits amid a broad-based rally in the debt. And for many investors, it also raised hopes of a similar result soon for Argentina, which has been away from global credit markets after its own restructuring in 2020.
“Ecuador’s debt issuance this week shows that even countries with a long history of defaults, high political risk and scarce reserves can access international markets at single-digit yields,” said Diego Chameides, chief economist at Banco Galicia, one of Argentina’s largest lenders. “It appears the window for Argentina’s market access could open up, which is key to dealing with large debt maturities in the coming years.”
Argentine bonds rallied Tuesday in tandem with Ecuadorian debt, extending recent gains. A measure of country risk has fallen below 500 basis points, levels officials have previously flagged as consistent with a return to markets.
Despite differences in size – Argentina’s economy is roughly four times larger than Ecuador’s – the two countries share several financial similarities. Both have restructured debt multiple times – nine for Argentina, 10 for Ecuador since their independences in the early part of the 1800s. And both remain under International Monetary Fund programmes while facing weak foreign-reserve positions, a longstanding concern for debt investors.
But the countries are also alike in seeing their prospects improve as political risks have eased under new administrations focused on fiscal consolidation, helping drive down yields. Ecuador President Daniel Noboa slashed a diesel subsidy and managed to contain subsequent social unrest, while Argentina’s Javier Milei alleviated investor concerns by loosening currency trading restrictions and building foreign reserves after a landslide victory in October’s midterm elections.
‘Clean read-through’
For investors, Ecuador’s buyback offer to reduce near-term maturities is a positive signal – and could also serve as a potential blueprint for Argentina.
“Ecuador’s latest transaction is a clean read-through for how Argentina’s curve could react to a well-designed liability management deal,” said Mauro Favini, senior portfolio manager at Vanguard. “Argentina is clearly improving, but until it extends its debt stack through a transaction akin to Ecuador’s, the market will struggle to take the curve meaningfully tighter.”
Argentina has weighed a return to markets since Milei’s midterms win helped push yield spreads toward the 550 basis-point area. While the rally has enabled a wave of corporate and provincial issuance, the sovereign itself has yet to test demand, relying instead on a repurchase agreement with banks to meet January payments.
In the meantime, Argentina’s Central Bank has been buying US dollars to rebuild its depleted stockpile of foreign reserves, one of debt investors' most pressing concerns. While the Central Bank has made substantial purchases in January, it may want to show more progress before launching a deal.
“Our impression is that they want to show several billion in FX purchases before going to market, as they are very focused on bringing down country risk before launching the deal,” said Walter Stoeppelwerth, chief investment officer at Grit Capital Group. “But it’s not as simple as Ecuador. Argentina’s swap could be gigantic in comparison.”
Officials have tried to downplay expectations of Argentina’s comeback. Economy Minister Luis Caputo has said he wants to reduce the country’s dependence on Wall Street. Milei recently said “the only thing we would go to international markets for would be rollover.”
That’s a stark contrast with the 2016-2018 period under former president Mauricio Macri, the last time Argentina had broad market access, in what ultimately became a debt-fuelled boom that collapsed.
Still, looming maturities leave limited room for Argentina to wait. Foreign-currency debt payments in 2026 and 2027 total nearly US$43 billion, according to calculations by Galicia, for which regaining market access is critical.
Yields on Argentina’s 2035 global bonds are near 9.1 percent, keeping the country among the few large, liquid emerging-market credits still offering enticing returns. Sovereign bond risk in the developing world has fallen to the lowest level in 13 years, shrinking the pool of high-yielding assets and boosting demand for riskier credits.
All of this argues for Argentina moving sooner rather than later, investors say.
“To push the curve toward true normalisation and lower long-term funding costs, Argentina will need an Ecuador-style, proactive liability management strategy,” Favini said. “Even after covering its 2026 liquidity needs via the repo, Argentina still needs to use the current market window.”
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by David Feliba, Bloomberg
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