Argentina’s risk spread rose to 524 points, Merval index lost 2.5% — The Rio Times
In Argentina, the risk spread on dollar-denominated bonds rose from 485 to 524 basis points over the week, while the S&P Merval stock index lost about 2.5%. The Rio Times reports.
On September 18, the indicator rose for the fifth consecutive day and reached its highest level since August 20. The risk spread reflects the additional yield investors demand for holding Argentine dollar-denominated bonds compared with US Treasury securities. It is calculated based on the JP Morgan EMBI index, where 100 basis points equal one percentage point.
Market reaction
The S&P Merval index, which includes Buenos Aires’ key stocks, fell by 1.29% on September 18, to 3,021,925.96 points. According to the Argentine outlet Ámbito, the index lost 2.7% in pesos and 2% in dollar terms over the week.
Pressure on Argentine assets intensified after the US Federal Reserve raised its rate by 25 basis points on September 16. This was the first rate increase since 2023. Higher US rates make US government bonds more attractive to investors and may reduce demand for risky debt instruments from emerging-market countries.
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An additional factor was data from Argentina’s statistics agency INDEC: in the second quarter, the country’s economy contracted by 0.6% compared with the first quarter. Year on year, it was nevertheless 2% larger, while the unemployment rate rose to 7.9%.
Peso exchange rate and upcoming events
Despite the bond sell-off, the Argentine peso changed little. The wholesale dollar exchange rate stood at 1,514.50 pesos on September 18, compared with 1,508.50 pesos a week earlier. On that day, Argentina’s central bank bought $36 million on the market, while gross international reserves fell from $50.5 billion to $49.8 billion.
An International Monetary Fund mission is due to arrive in Argentina on September 21 for the third review of the country’s program. Its members will assess, among other things, reserve accumulation and the fiscal surplus. A debt payment of approximately $800 million is also scheduled for September 25.
