LOCAL MARKETS CLOSED LOWER ON MONDAY, against a global backdrop marked by the escalating conflict in the Middle East. Sovereign dollar bonds fell slightly and country risk edged up. Peso bonds also closed lower, led down by dollar-linked bonds. Equities tracked the negative mood, hit by banks, though energy names softened part of the decline. Financial dollars fell along with the official rate, in a session where the BCRA accelerated its pace of purchases. On the macro front, June CPI is due today, which we estimate at 2.0% m/m. The Treasury also released terms for an upcoming auction facing maturities of nearly $3 trillion.

DOLLAR BONDS OPENED THE WEEK LOWER, in line with the deteriorating global mood following the escalation in the Middle East. Sovereign debt fell 0.3%, a smaller decline than the emerging-market average. The drop was sharper in New York law bonds, which lost 0.3%, while local law bonds fell 0.1%. With this performance, country risk closed at 404 bps, just above Friday’s close. Separately, Bopreales rose marginally.

PESO CURVES ALSO OPENED THE WEEK LOWER, though yields eased. CER bonds held up best, up 0.2%, while Duals rose 0.1%. Fixed-rate bonds were flat, with short-end yields rising slightly, from 1.8% to 1.9% EMR. Dollar-linked bonds lagged the most, down 0.2%, in line with the decline in exchange rates.

THE OFFICIAL EXCHANGE RATE FELL 0.3%, closing at $1,486.05, with a rise of just 0.2% accumulated on the month. Financial dollars followed suit: the MEP down 0.1% and the CCL down 0.3%, to $1,523.6 and $1,567.3 respectively, with the FX spread at 2.9%. The decline came even as the BCRA accelerated purchases, buying USD 280 M on the day. It has now accumulated USD 570 M this month and USD 11,745 M this year. Gross reserves, however, fell USD 517 M, closing at USD 48,205 M.

THE MERVAL FELL 1.0% IN DOLLAR TERMS, closing at USD 2,064, in a broadly negative session. Energy and communications were the only sectors in the green; financials and construction led the declines. Among local stocks, BBVA (-4.7%), Banco Macro (-3.2%) and Central Puerto (-2.9%) posted the worst performance; YPF (+4.1%), Telecom (+3.6%) and TGS (+2.7%) led the gains. Among ADRs, the average drop was 0.9%. Globant (+7.2%), YPF (+4.0%) and Ternium (+1.2%) led the gains; BBVA (-5.6%), Banco Macro (-4.5%) and Galicia (-4.3%) led the losses.

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