AWAITING THE RECOVERY WHILE SAFEGUARDING 2027. Despite disappointing activity data, local assets closed the week well. USD-denominated sovereign bonds extended their gains, country risk kept falling and equities recovered some ground after the prior week's drop. In pesos, system liquidity normalized following the late-June stress and short-term rates eased, with the curves compressing. The news of the week was the renewal of the BCRA's Repo with international banks, stretching maturities out to 2028 and thereby improving the net reserves position. Despite this, the exchange rate remained under upward pressure and the BCRA again slowed its pace of purchases. On the macro front, the data confirmed a weak pulse, with activity unable to take off and tax revenue falling again in real terms. This week's focus will be on the Treasury's financial program presentation and the July 9 coupon and principal payment on Bonares and Globales.

ACTIVITY CONTRACTED AGAIN, following the rebound seen in March. The monthly economic activity estimator fell 1.5% m/m, though it stood 1.6% above a year earlier, with only seven of the fifteen sectors growing. The impulse was again concentrated in agriculture (+10.9% y/y) and mining (+17.1% y/y), which contributed 1.8 pp to year-over-year growth. With smaller weight, financial intermediation (+4.5% y/y), transport and communications (+2.0% y/y) and electricity, gas and water (+6.4% y/y) also added. At the other extreme, manufacturing (-2.9% y/y), commerce (-3.2% y/y) and fishing (-28.4% y/y) together subtracted 0.9 pp, while construction (-1.8% y/y) followed the same tone, prolonging the weakness of urban sectors seen throughout 2026. In the first four months of the year, activity grew 2.1% y/y.

TAX REVENUE IS NOT PICKING UP, with tax collection falling 7.5% y/y in real terms amid a generally poor performance across all subgroups except personal-assets tax and fuels. Taxes tied directly to the activity level (VAT, the check tax and excise taxes) fell 4% y/y real, and employment-related taxes fell 3% y/y, dragged down by the decline in the formal wage bill. Foreign-trade taxes dropped 23% y/y on lower export duties (-46% real y/y, due to the high comparison base from the temporary rate cut, plus lower rates today) and import duties (-15% real y/y). With this result, total revenue in the first half of the year fell 5% y/y real. Beyond signaling the weakness of economic activity, the persistent decline in revenue forces the Treasury to keep cutting line items —or delaying payments— to maintain the fiscal balance.

THE BCRA IS BUYING, BUT LESS, purchasing USD 222 M over the past week while the agricultural sector settled USD 774 M, showing that net demand from other sectors continued to rise. As a result, purchases averaged USD 44 M per day over the week, versus USD 71 M in June and well below the USD 138 M of April and May. The moderation accompanied an exchange rate that remained under upward pressure. Gross reserves closed at USD 48,237 M, USD 1,155 M above the prior week's close, a change explained mainly by the seasonal rebuilding of reserve requirements at the start of the month.

THE BCRA ROLLED OVER ITS REPO TO 2028, cancelling all of its outstanding repo liabilities for USD 6,000 M and arranging a new operation of the same amount with ten international banks, maturing in September 2028. This refinanced all maturities scheduled for 2026 and 2027, pushing them beyond next year's elections. The operation was instrumented with BONAR bonds from the BCRA's portfolio, and at the June 30 auction it received bids for USD 8,250 M, well above the amount tendered. The new rate came in at SOFR + 4%, equivalent to a 7.6% rate, marking a lower financing cost and a larger number of participating banks than the previous transaction. The measure strengthens the Central Bank's foreign-currency liquidity position and improves the net international reserves position, which turns positive.

THE EXCHANGE RATE ROSE, with the official rate up 0.9% on the week to close at $1,488.6, sitting 21% below the top of the band ($1,844.85). Financial dollars followed: the MEP advanced 0.6% to $1,526 and the CCL rose 1.9% to $1,571, with the spread (canje) widening to 3.0% from 1.6% the prior week.

PESO CURVES ENDED LOWER IN USD TERMS. After the late-June stress, system liquidity was rebuilt this week. The stock of pesos absorbed by the BCRA via Repo closed at ARS 3.5 trillion, up from an average of ARS 1.5 trillion in the last three sessions of the prior week, when the one-day repo (caución) had been more strained. With that easing, overnight rates stand at around 18.7% NAR for the one-day caución and 20.1% NAR for the Repo. On the peso curve, CER bonds led with -0.6%, followed by Lecaps (-0.9%), duals (-1.1%) and dollar-linked (-1.3%). CER bonds yield positive real rates all along the curve, from CER+1.7% at the short end to CER+8.3% at the long end, while breakeven inflation shows the market still pricing a slowdown toward Q4-26: it holds around 1.6% m/m through October and drops to 1.3% m/m from November, accumulating 28% in 2026. Lecaps trade in the 1.7%-1.9% EMR range. Dollar-linked bonds yield devaluation +3.5% on average, with an implied exchange rate of $1,500 for July (direct devaluation of 0.8%) rising to $1,546 in September (1.3% m/m). Duals offer a margin of 0.2%-0.6% over the TAMAR rate, with a breakeven TAMAR around 21%.

COUNTRY RISK NEAR 400, with hard-dollar sovereign debt closing the week up 0.7%, beating the 0.2% gain of comparables. Globales led the move with a 1.0% rise, while Bonares advanced just 0.3%. The standout was the GD41, which gained 1.2%. Country risk fell 23 bp on the week to 415 bp, a new low for the Milei administration, and the spread versus the EMBI Latam compressed 13 bp to 164 bp, a recent low. At these prices, Bonares offer yields between 6.6% and 9.2%, while Globales yield between 5.3% and 8.3%. Bopreales closed the week in the red, down 0.4%. The Bopreal Series 1-A was the worst performer with a 1.9% drop, while the Bopreal Series 4-A moved against the grain with a 0.6% rise. At these prices, the BCRA curve yields between 3.5% and 6.9%. Provincial bonds advanced 0.4% on the week, with limited moves along the curve. Buenos Aires 2037 was the best performer with a 0.7% rise, followed by Salta 2027 with a 0.1% gain. At the opposite end, Jujuy 2027 and Tierra del Fuego posted slight declines. In terms of yields, the segment offers rates between 6.1% and 10.8%. Corporate bonds closed the week up just 0.1%. The divergence across jurisdictions was notable: Argentine-law instruments gained 0.4%, driven by the banking sector, while New York-law ones traded flat. Banco Galicia 2026 under local law rose 2.1%. In terms of yields, NY-law corporates offer an average YTM of 7.3%, versus 4.5% for local-law ones.

THE MERVAL FOLLOWED THE MOVE, posting a 0.4% gain in USD CCL terms (2.3% in pesos) to close at USD 2,033. The Merval's performance was in line with Latam (0.3%) and Brazil (0.7%). By sector, only consumer and banks pushed higher, while communication, materials and utilities led the declines. Among local shares, Mirgor (3.5%), BBVA (2.0%) and LOMA (1.6%) led the gains, while Holcim (-7.2%), Ternium (-6.7%) and Transener (-6.5%) posted the largest drops. Shares listed in New York did not follow the rise, trading down 0.4% on average for the week. Vista (−6.6%), Ternium (−6.1%) and TGS (−4.5%) posted the sharpest declines, while Globant (+8.3%), MELI (+5.3%) and IRSA (+3.1%) moved against the grain.

WEEK AHEAD

  • On Monday the economic team will present the financial program to address 2026 and 2027 dollar-denominated maturities, and the BCRA will publish the June REM.
  • On the activity front, Tuesday brings May mining and fishing production data, while Wednesday delivers the manufacturing IPI (industrial production index) and construction sector indicators (ISAC), also for May.
  • Financial focus will center on the Treasury's financial program presentation and on the July 9 Bonares and Globales coupon and amortization payment, with attention on whether investors reinvest those flows back into the sovereign curve.