Peso Bonds Edge Higher as Inflation Meets Expectations

SEPTEMBER INFLATION CAME IN LINE WITH EXPECTATIONS AND SET THE TONE FOR THE SESSION, ahead of today's Treasury auction. On a positive note, the BCRA stepped up its dollar purchases again, accelerating its pace of reserve accumulation in October after a weak September. Local assets traded calmly: the peso curve edged slightly higher, hard-dollar sovereigns closed flat, and the Merval advanced in peso terms.

TODAY THE TREASURY WILL HOLD ITS DEBT AUCTION, with a limited maturity: the Lecap S16O6, for about ARS 4.9 trillion. Given the small size of the maturity, we expect the Treasury to use it to extend duration and roll over above 100%.

THE MENU FOLLOWS THE SAME LOGIC, with the only instrument maturing in 2027 being the S29E7, which is also the sole fixed-rate option. The rest mature from 2028 onward and come with coverage: the TMVE8 (Tamar/DL dual), the TMG28 (Tamar), and the TXMD9 (CER/Tamar dual). Demand is very likely to concentrate in the S29E7, but the key will be how much gets allotted in the long end, as a gauge of appetite for duration.

HARD-DOLLAR BONDS CLOSED PRACTICALLY UNCHANGED, with a slight average decline of 0.1% that left them lagging emerging-market debt, which rose 0.2%. Globales slipped 0.1% while Bonares ended flat. The short end held in positive territory (GD29 +0.3%, AO28 +0.3%), while the long end gave back ground, with GD46 (-0.4%) and GD35 (-0.3%) among the biggest decliners. Against this backdrop, country risk rose 7 bps to close at 596 bps. Bopreal bonds, meanwhile, posted a marginal 0.1% gain.

THE PESO CURVE ROSE SLIGHTLY IN USD TERMS, with CER and fixed-rate instruments both up 0.2% on average and better performance in the long end, where Lecap and Boncap gained 0.4% versus a 0.1% rise in the short end. On the other hand, dollar-linked bonds fell 0.3% on a day when the CCL edged 0.1% lower, duals slipped 0.1%, and TAMAR-linked notes edged up 0.1%. Meanwhile, overnight rates rose slightly, with one-day caución at 21.0% NAR (+0.4 pp) and repo at 20.7% (+0.2 pp).

THE OFFICIAL EXCHANGE RATE CLOSED AT ARS 1,515.9, practically unchanged on the day, and down 0.1% so far in October. In the financial segment, the MEP held steady at ARS 1,539.8, while the CCL slipped 0.1% to ARS 1,609.0, with the spread over the official rate at 6.1% and the MEP-CCL swap at 4.5%. Separately, the BCRA bought USD 291 M on the day, its largest daily purchase since July 24, bringing October's total to USD 631 M and USD 15,211 M so far this year. The figure confirms a change of pace versus September: in just eight trading sessions in October, the monetary authority has already topped the USD 473 M bought in all of the prior month, with a daily average of around USD 79 M versus about USD 23 M in September. Meanwhile, gross reserves rose USD 138 M to close at USD 49,839 M.

THE MERVAL ROSE 1.5% IN PESOS AND 0.2% IN CCL TERMS, closing at USD 1,781.9. The session had a buying bias, with Real Estate (+3.9%), Energy (+2.9%), and Materials (+1.8%) leading the gains, while Construction (-0.7%), Non-Essential Consumer (-0.7%), and Communications (-0.2%) lagged. Among local names, Ternium (+4.7%), IRSA (+4.6%), and Holcim (+4.2%) stood out, while Mirgor (-3.1%), Transener (-2.6%), and Telecom (-2.5%) led the declines. On Wall Street, ADRs rose 0.5% on average, led by IRSA (+3.2%), Central Puerto (+2.7%), and Adecoagro (+2.3%), while Bioceres (-1.8%), Corporación América (-1.1%), and Mercado Libre (-0.9%) were among the laggards.

SEPTEMBER CPI ROSE 1.9% M/M, in line with market expectations, marking a slight acceleration from August's 1.7%. The year-over-year change stood at 33.4% (33.5% in August), with the year-to-date figure reaching 23.6%. The acceleration in the headline index reflected the more volatile components: Seasonal items rose 2.9% after an 0.9% drop in August, driven by vegetables, while Regulated prices advanced 2.3% (2.2% prior) on adjustments to gas, electricity, and prepaid healthcare. Core inflation, by contrast, slowed to 1.7% from 1.8%, its lowest reading since June, with increases concentrated in food away from home and pharmaceutical products. By category, Housing, water, electricity and gas led with 3.1% (2.8% in August), followed by Education (3.0%), while Restaurants and hotels (1.1%) and Apparel (1.4%) posted the smallest changes. Services (2.4%) once again outpaced goods (1.7%), with both accelerating versus the prior month.