Argentine bonds have swung on every headline that has peppered trading screens over the past two weeks in a frenzy of volatility. Some investors see local traders behind many of the moves as foreigners hold tight.
The country’s dollar notes, which saw their biggest rally in three years last week, came close to erasing all the advance in the next few days before rebounding once again. The driver was always the same: news on possible US aid for the administration of President Javier Milei.
No day was the roller coaster more evident than on Thursday, when the bonds jumped after US Treasury Secretary Scott Bessent reiterated his pledge to help Argentina, then fell as he clarified that the aid didn’t involve fresh cash for the country. The debt flipped again in afternoon trading on news that Economy Minister Luis Caputo and Central Bank Governor Santiago Bausili would travel to Washington on Friday to discuss a US$20-billion swap line.
Locals saw their share of ownership of dollar bonds more than triple after a market crash in August 2019 that was triggered by a landslide election loss for former business-friendly president Mauricio Macri, confirming investor fears of a return of leftist politics. His successor, Alberto Fernández, began a debt restructuring process the following year. Resident holders owned 31 percent of New York law debt by June 2025, compared to just 8.6 percent in September 2020, according to data compiled by brokerage PPI Argentina.
“The volatility is associated with the domestic holder story,” said Jared Lou, a portfolio manager at William Blair in New York. “Foreigners got burned, careers were destroyed during Macri.”
Peso crisis
Volatility soared in the past few weeks as Argentina slipped back toward a currency crisis.
A slump in the peso, toward the limit of its trading band, led the government to sell what traders estimate as about US$650 million in the spot market this week and restore some exchange controls to rein in dollar demand. The peso still shed over seven percent in the last five sessions, closing flat on Friday, while the government hasn’t disclosed any official intervention figures.
That drop comes as traders grow increasingly sceptical of Milei’s political capital ahead of midterm elections on October 26, particularly after suffering an unexpectedly large defeat in regional elections in Buenos Aires Province in September. A drop in support in Congress could stall the libertarians overhaul of Argentina’s economy.
But while local investors may be using this to step out of the bond market, some international firms are making bold calls to buy the dip. Following a visit this week to Buenos Aires, Citigroup strategists led by Donato Guarino wrote in a report that current bond valuations offered an “interesting entry point,” though volatility is set to remain.
David Austerweil, emerging-markets deputy portfolio manager at VanEck in New York, went overweight on Argentina after bonds crashed following Milei’s defeat in Buenos Aires Province. Although he notes the price action hasn’t been positive recently, he’s confident that US Treasury aid is going to secure bond payments, at least for the shorter end of the curve.
“We think this is good entry point,” he said. “Assuming not a total disaster in the midterms.”
Not all foreign investors have been adding. Some funds were heavily overweight heading into the Buenos Aires Province election and are now being forced to cut their positions, Austerweil said.
Now, both local and foreign creditors are focusing on the future of the exchange rate policy, especially as Milei is expected to prioritise currency stability over reserve accumulation ahead of the midterms. The government only captured a fraction of a temporary surge in dollar supply driven by a tax break for farm exports that ended this week, letting the rest be gobbled up by Argentines who access the official market and then turn to sell at the higher parallel rate.
Foreign investors see a scenario of FX rate unification as positive, said Walter Stoeppelwerth, chief investment officer at local brokerage Grit Capital Group.
“The biggest risk everyone sees is that the economic team will squander the few dollars they have” before the elections on October 26, he said. “All of this is part of the superstition surrounding elections. The original sin for a government party is to allow a devaluation that results in inflation.”
by Nicolle Yapur & Ignacio Olivera Doll, Bloomberg
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