Inflation Hits a Yearly Low Ahead of the Treasury Auction

INDEC POSTED THE YEAR'S LOWEST INFLATION READING, and the market heads into today's auction with the signal it was waiting for. Dollar sovereigns eased, with the decline concentrated in the long end, though they outperformed emerging-market debt, and country risk held below 500 bps. The peso curve went back to buying duration, the exchange rate traded without tension, and the Merval rallied sharply led by consumer and energy names.

THE TREASURY AUCTIONS TODAY, against maturities of $8.1 trillion coming due Monday — $4.3 trillion in Lecaps and $3.8 trillion in duals — an amount that doesn't look demanding. System liquidity normalized considerably and the peso stock the BCRA absorbs via repo holds above $3 trillion, so the Treasury arrives with ample room to roll over the entire maturity and secure net financing. The menu combines fixed rate, TAMAR, CER and dollar-linked:
LECAP: S13N6 (13/11/26)
TAMAR: TMF27 (26/2/27) and TML27 (30/7/27)
CER: X29E7 (29/1/27)
Dollar linked: D30O6 (30/10/26), D30N6 (30/11/26, new), D31M7 (31/3/27) and TZV27 (30/6/27)

THE MENU AGAIN LEANS TOWARD THE SHORT END, with the only fixed-rate option maturing in November of this year; no instrument extends beyond July 2027, so the Treasury is relying on available liquidity to roll over without validating the rates the market demands at the long end.

DOLLAR BONDS CLOSED DOWN 0.3% ON AVERAGE, with Globales and Bonares each giving up 0.3%, in a session where the loss was concentrated entirely in the long end while the short end closed in buying territory, with the GD29 up 0.6% and the AL29 up 0.1%. Among the hardest hit were the AL41, down 1.5%, and the GD38, down 0.8%. The move tracked emerging-market debt, which fell 0.8%, so Argentine debt outperformed on a relative basis. Country risk held at 491 bps. The Bopreal eased 0.1% in dollars.

PESO CURVES ENDED LOWER IN USD TERMS, CER-TAMAR duals led the declines at -0.1%, followed by fixed rate at -0.3% and TAMAR at -0.4%, while CER instruments fell 0.5% and dollar-linked bonds dropped 0.8%, in line with the official rate's USD-adjusted move. Within fixed rate the move flattened the curve, with the long end flat at 0.0% against -0.3% for the short end, so the spread compressed and the long end now yields around 2.15% EMR versus 1.9% EMR at the short end.

THE OFFICIAL EXCHANGE RATE FELL 0.1% TO $1,512.99, and is up 0.2% so far this month. The MEP dollar rose 0.2% to $1,533.83 and the CCL advanced 0.5% to $1,597.63, putting the implied spread at 4.2%. Separately, the BCRA bought USD 6 million on the day, bringing purchases to USD 118 million in September and USD 14,225 million so far this year. Meanwhile, gross reserves fell USD 111 million to close at USD 50,506 million.

THE MERVAL ROSE 1.1% IN CCL-DOLLAR TERMS, up 1.5% in pesos, closing at USD 1,980.1. Leadership came from consumer staples, followed by communications and energy, while materials, construction and industrials lagged. On the local panel the top gainers were Cresud at 5.4%, Transportadora de Gas del Sur at 2.8% and Pampa Energía at 1.9%, while on the other side were Ternium down 4.3%, Banco de Valores down 2.2% and Aluar down 1.9%. New York-listed shares rose 1.5% on average, led by Vista Energy at 5.9%, followed by Cresud at 5.8% and Telecom Argentina at 3.8%, while AdecoAgro fell 1.0%, Bioceres 0.9% and Ternium 0.9%.

AUGUST CPI CONFIRMED THE DISINFLATION PROCESS IS CONTINUING, the headline index posted a 1.7% m/m variation, the lowest reading of the year and in line with what the market was pricing in. On a cumulative basis, inflation stands at 21.3% year-to-date and the y/y rate eased to 33.5%, from 33.8% in July. The improvement versus prior months owes largely to the seasonal component, which posted a -0.9% m/m variation after July's increase, while the rest of the categories held a steadier pace.