Sovereigns Fall as Country Risk Reaches 578 Bps

DOLLAR-DENOMINATED SOVEREIGN DEBT FELL, in a risk-off session across emerging markets, with the long end hit hardest and country risk rising. The peso curve moved mixed ahead of Monday's auction, while the official exchange rate rose slightly and the BCRA added modest purchases. The Merval fell again. The day's agenda included the Senate's approval of the BCRA Charter reform, San Juan's return to international markets, and a weak EMAE reading.

THE TREASURY ANNOUNCED THE TERMS OF MONDAY THE 28TH'S AUCTION, in which $8.6 trillion comes due. That amount includes USD 1,098 M of the September LELINK left over after Tuesday's swap. The Treasury will again offer only short-term instruments, as in the last three auctions. In pesos, the menu includes a LECAP maturing January 2027 (T15E7), a LECER maturing May 2027 (TZXY7), and a TAMAR-linked bond maturing July 2027 (TML27). It will also offer the two LELINK notes maturing this year, D30O6 and D30N6.

SAN JUAN PROVINCE RETURNED TO INTERNATIONAL MARKETS, after 27 years, having last tapped external markets in 1999. It placed a USD 600 M, 9-year bond under New York law, with a coupon near 9.875%. Demand comfortably exceeded the amount offered, from both local and foreign investors. Proceeds will go toward infrastructure and public works, with a focus on mining development. The province came to market with low debt levels, around 10% of annual revenue, and a primary surplus of 0.9% of total revenue in the second quarter.

THE SENATE APPROVED THE BCRA CHARTER REFORM, which now returns to the Lower House for final passage given the changes introduced. The bill gives the Central Bank a single mandate — preserving the currency's value — and eliminates financing to the Treasury. The main change is that only the Senate will appoint and remove BCRA authorities, by absolute majority; the prior text required two-thirds of both chambers. Board members will serve six-year terms.

DOLLAR-DENOMINATED BONDS FELL 0.4% ON AVERAGE, in line with emerging market debt, which dropped 0.5%. Bonares lost 0.6% and Globales just 0.1%. Within the New York-law curve, the short end rose as much as 1.9%, partly offsetting the longer maturities, which fell as much as 1.3%. Country risk rose 12 bps to close at 578 bps. Meanwhile, Bopreal bonds measured in MEP dollars gained 0.2%.

PESO CURVES ENDED LOWER IN USD TERMS, with contained moves. TAMAR notes fell 0.2% and dollar-linked bonds fell 0.3%, while fixed-rate and CER-TAMAR duals fell 0.6%. CER bonds fell 0.7%, dragged down by longer maturities. Overnight rates held stable: caución closed at 20.5% NAR and repo at 20.4% NAR.

THE OFFICIAL EXCHANGE RATE ROSE 0.2%, to close at $1,518.7, bringing its September gain to 0.6%. The MEP dollar also rose 0.2% to $1,544.2, while the CCL rose 0.6% to $1,612.7, widening the gap to 4.4%. Meanwhile, the BCRA bought USD 8 M on the day, taking its September total to USD 232 M and its year-to-date total to USD 14,339 M. Gross reserves fell USD 88 M to close at USD 48,845 M.

THE MERVAL FELL 1.2% IN CCL DOLLAR TERMS, (-1.0% in pesos), closing at USD 1,821. No sector ended higher: consumer staples, energy, and industrials fell the least, while communications, construction, and non-essential consumer names lagged. Within local names, none rose in USD terms: Central Puerto (-0.2%) and Cresud (-0.3%) fell least, followed by Transportadora Gas del Sur (-0.9%). The biggest decliners were Telecom (-3.5%), Edenor (-3.2%), and Loma Negra (-2.9%). In New York, ADRs fell 1.6% on average. Globant (+1.1%) and Cresud (+0.2%) stood out, with Central Puerto (-0.1%) little changed, while Bioceres (-5.3%), Telecom (-4.3%), and Edenor (-3.0%) posted the worst declines.

JULY EMAE FELL 2.9% M/M SEASONALLY ADJUSTED, well worse than expected, leaving the index at its lowest level since March 2025. On a year-over-year basis it fell 1.4% y/y, even against a low base, and the year-to-date figure slowed to 1.7% y/y. The decline was broad-based: eight of fifteen sectors contracted, led by commerce (-5.1% y/y) and industry (-4.6% y/y), while mining (+8.4% y/y) and agriculture (+0.7% y/y) were not enough to offset the drag. Activity has now fallen in four of the seven months so far this year, reinforcing what we've been anticipating: an economy with no engine of its own beyond the primary sectors, which this time also failed to sustain it. With the sectors that generate the most employment increasingly lagging, there is less room to improve social sentiment just as the 2027 election calendar begins to come into view.