OCTOBER INFLATION SURPRISED TO THE UPSIDE, setting the tone for the local session. The peso curve reacted by seeking hedges, with CER-linked and dual bonds leading while fixed-rate paper stood still. Dollar sovereigns held a buying tone concentrated in the long end. The official exchange rate eased slightly as the BCRA resumed purchases, and the Merval extended its losing streak, dragged down by construction and real estate.
PESO CURVES WERE ROUGHLY FLAT IN USD TERMS, as the curve reacted to the higher-than-expected inflation print by tilting toward hedge instruments. CER-TAMAR duals and dollar-linked bonds were about flat at 0.0% once adjusted for the CCL move, followed by CER bonds, down 0.1% in USD terms, with the short end outperforming. Fixed-rate paper closed unchanged, with yields between 2.0% and 2.3% EMR. Overnight, the 1-day caución rate fell 2.5 points to 21.6% NAR and the repo rate eased 1.1 points to 21.4%.
DOLLAR BONDS ROSE 0.9% ON AVERAGE, though performance was mixed across segments. Shorter maturities closed down as much as 0.9%, while the long end advanced as much as 2.4%. Globales gained 1.0% and Bonares 0.8%, bucking the trend in emerging-market debt, which fell 0.8%. As a result, country risk fell 23 bps to 829 bps. Bopreal bonds rose 0.8% in MEP dollar terms, with 2028 maturities outperforming.
THE OFFICIAL EXCHANGE RATE FELL 0.2%, to $1,544.4, and is up 0.5% so far in November. The MEP dollar retreated 0.3% to $1,573.6, while the CCL dollar advanced 0.4% to $1,676.3, widening the spread (canje) to 6.5%. Meanwhile, the BCRA bought USD 103 M on the day, bringing its November total to USD 183 M and its year-to-date total to USD 16,158 M. Gross reserves fell USD 252 M to close at USD 49,078 M.
THE MERVAL FELL 1.7% IN CCL DOLLAR TERMS, to USD 49.5 (-1.1% in pesos), posting its fifth straight decline. Among local panel gainers, Telecom Argentina (2.1%), Bolsas y Mercados Argentinos (1.5%) and Central Puerto (1.1%) stood out. The biggest decliners were Holcim (-8.9%), IRSA (-5.2%) and Banco BBVA Argentina (-3.0%). On Wall Street, ADRs retreated 2.1% on average, with only Central Puerto advancing (1.2%), while Adecoagro (-6.4%), IRSA (-4.7%) and Bioceres (-4.6%) led the declines.
OCTOBER INFLATION CAME IN AT 2.2% M/M, above the 1.8% expected by the REM survey and the 1.9% implied by the CER-vs-Lecap bond curve. Prices have risen 26.3% year-to-date and 33.1% y/y, just below September's 33.4% and within the range that has held for the past year. The acceleration had clear drivers: seasonal items rose 5.5% m/m on higher vegetable prices, and regulated prices rose 2.9% m/m on gas and fuel increases. As a result, housing, water, electricity and gas was the division with the largest increase (4.2%), and food had the largest impact in nearly every region. The good news came from core CPI, which eased to 1.5% m/m from 1.7% in September, its lowest reading in recent months. This suggests the jump in the headline index owes more to volatile components and tariff corrections than to a change in trend. Still, with regulated prices putting a floor under the index, inflation will likely keep struggling to break through resistance for the rest of the year.
