Argentina bonds, peso extend rally with eyes on US support details

By Rodrigo Campos and Karin Strohecker

Argentina’s International Bonds and Peso Strengthen

NEW YORK/LONDON (Reuters) – Argentina’s international bonds experienced a notable uptick on Tuesday, and the local peso gained strength against the dollar following a supportive address by U.S. President Donald Trump. The President extended his backing to Argentina’s new right-wing leader, Javier Milei, highlighting confidence in his economic program.

World Bank’s Support Commitment

The World Bank announced its intention to disburse up to $4 billion in Argentina over the next few months to bolster the country’s reform initiatives. This financial commitment signals a strategic partnership aimed at supporting Argentina’s economic recovery and policy changes.

Market Response to U.S. Support

Following Trump’s endorsement of Milei’s economic plans, Argentine financial assets rallied. The U.S. expressed readiness to assist in ensuring mutual success for both nations without necessitating an outright bailout for Argentina. The South American country is approaching a significant midterm election on October 26, making this financial backing particularly critical.

Bond and Currency Performance

Market data from MarketAxess showed Argentine bonds climbing by 2 to 3 cents, with the 2046 bond rising 2.8 cents to 59 cents on the dollar. The peso, experiencing a remarkable rebound, appreciated nearly 4% against the dollar, building on gains made on Monday.

Stock Market Trends

Additionally, local stocks displayed resilience, with the benchmark index increasing by approximately 1%, following an impressive nearly 8% rise the previous day. Shares on U.S. exchanges involving Argentine companies also saw a 3% increase.

Anticipated Support Details

Investor enthusiasm swelled after U.S. Treasury Secretary Scott Bessent’s initial support announcement, although details remain sparse regarding the specifics of the assistance package. “We are keenly awaiting further clarifications, but the primary goal is to stabilize Argentine assets,” noted Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS. “Bessent’s remarks were notably strong and represent an unprecedented level of support for Argentina.”

Skepticism on Long-Term Support

Despite the current optimism, some market analysts remain cautious. “For the short term, it’s certainly good,” commented Juan Perez, director of trading at Monex. He added that the long-term impact would depend on how U.S. commitments translate into tangible support. He remarked, “Argentina seems to be benefitting from a political alignment with the Trump administration, which emphasizes that any commercial relationship will intertwine with political objectives rather than solely numerical assessments.”