Argentine dollar bonds rallied Wednesday after Fitch Ratings upgraded the country’s credit score to its highest level since 2019 amid improved economic conditions.
The nation was raised late Tuesday to B-, six notches below investment grade. Argentina has been rated above CCC at Fitch for less than six years in the last quarter century.
Benchmark notes due 2035 – the country’s most widely traded global bond – rose 1.4 cents to 75.9 cents on the dollar, pushing yields down to 9.66 percent. Bonds maturing in 2041 saw similar gains, while shorter-term issuances posted gains of less than one cent.
Fitch cited a “stronger external position” as the country “emerged as a net energy exporter,” helping shield it from the oil shock linked to the Iran war. The agency also cited improved fiscal and external balances, Central Bank dollar purchases, progress on economic reforms and expectations that the government will secure financing to meet upcoming debt obligations.
“This is an additional incentive to bring sovereign spreads closer to market-access levels,” said Pedro Siaba Serrate, Head of Research at Portfolio Personal Inversiones. “Fitch has recognised what the market had been slowly pricing for months: a structurally stronger macro framework, a firmer fiscal anchor and improving external dynamics.”
Investors and officials expect further upgrades in Argentina’s credit rating to help unlock demand for its debt, as a number of institutional investors may be able to allocate funds to the asset class if other rating agencies follow with similar upgrades.
Milei’s rise to power and his decisive midterm victory late last year triggered a sharp repricing of risk, with yields on longer-dated securities falling from distressed levels. But more recent progress had yielded only moderate gains in the country’s debt, with investors noting that Argentina’s presence in the CCC category continued to weigh on demand – effectively sidelining a large pool of buyers, such as pension funds, insurers and emerging-market funds with strict limits on lower-rated debt.
“With this, Argentina crosses a key threshold in international financial markets,” Deputy Economy Minister José Luis Daza said in a post on X. “It is a major shift that significantly expands the pool of eligible investors for Argentine sovereign and corporate debt. Thousands of institutional funds cannot invest in CCC-rated instruments. Now they will be able to invest in Argentine bonds.”
Investors have increasingly bet that Argentina is moving closer to regaining access to international capital markets, a key step toward refinancing future maturities and easing pressure on foreign reserves, even as Economy Minister Luis Caputo has ruled out such a move for now.
The country faces sizeable debt maturities in 2027, with the administration looking to secure financing through privatisation proceeds, local issuance of dollar-denominated bonds and a bank loan backed by multilateral guarantees.
“The government has thus far opted to forgo tapping external markets, avoiding the higher borrowing costs this would entail but limiting its ability to build a larger liquidity cushion for the coming election year,” Fitch analysts said in the note.
by David Feliba, Bloomberg
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