Key points:
- October’s peso run led to $20 billion lifeline from Trump
- Milei’s economic reforms tie peso to inflation
- Analysts see potential for Argentina’s market return
- Central bank aims to boost FX reserves by $17 billion
- Argentina’s ninth sovereign default occurred in 2020
By Marc Jones
Crucial currency market changes announced by Argentina aimed at rebuilding FX reserves could see the country make its long-awaited return to international borrowing markets early next year, Wall Street investment bankers have predicted.
President Javier Milei’s radical overhaul of Argentina’s economy took another big step on Monday as the central bank announced it would start tying the peso’s trading band to inflation from the start of next year.
A primary goal is to accumulate foreign currency reserves – something investors have long-hoped to see – and analysts see it as important for regaining the access to capital markets Argentina lost during its ninth sovereign default in 2020.
“This should make for a seamless second IMF review,” Morgan Stanley analyst Simon Waever said in a research note.
“It also increases the likelihood of external market access, perhaps even sooner than the second quarter of 2026.”
Argentina last issued an international market bond in 2018 under then-President Mauricio Macri. A successful return next year would mark a key vote of confidence for Milei’s reform drive and restore its standing on international markets.
JPMorgan analysts said were also encouraged by Monday’s measures, saying they showed the country continues to move in the right direction and would “reinforce the case for market access for foreign law FX bonds in the near term.”
Argentina’s central bank said its new arrangement aims to purchase up to $10 billion, with a potential overall reserve accumulation of $17 billion, depending on balance of payments flows.
“It suggests that FX reserve accumulation is still a priority,” Morgan Stanley’s Waever said, adding it should help allay concerns that authorities’ focus has waned since striking a $20 billion IMF deal in April, something which has helped lower Argentina’s bond yields to around 10%.
A full return to the capital markets would cap a dramatic turnaround in sentiment since October’s run on the peso when mid-term elections sparked fears about the future of Milei’s reform programme and forced the government to seek a $20 billion lifeline from U.S. President Donald Trump.
“Our base case from here is that important structural reforms are passed in the next few months … which will drive yields lower when added to gradual FX reserve accumulation,” Waever said.
It could pave the way for a 7-12 year bond worth a minimum $3 billion to cover $2.8 billion of debt payments due in July, while the bond’s ‘coupon’ as it is known, could be close to 9.5%, he added.
“Most likely timing would be end-2Q26, but it’s possible that it happens even earlier,” Waever said.
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