Adverse global backdrop over a macro that isn't taking off. Long-end U.S. rates dominated the week, and Argentine sovereign debt paid the highest price: hard dollar bonds retreated and country risk climbed back above 500 points, with a hit that far exceeded regional peers and only eased into the close. In peso terms the picture was similar: liquidity stayed tight for most of the week, except on Friday when rates normalized again. On the macro front, data showed a marginal improvement without changing the overall diagnosis: activity rebounded after two months of declines though the quarter closed lower, private registered wages still failed to recover ground and consumer confidence fell again, the trade surplus held steady, and the Treasury sustained the fiscal surplus. In the FX market, the BCRA kept slowing its pace of purchases with the exchange rate stable around $1,500. Next week the focus returns to the peso market: the dollar-linked fixing and the Treasury auction will show whether the economic team validates the liquidity normalization or returns to a contractionary bias, in a context where the large volume of maturities could generate pressure on the dollar.

ACTIVITY IMPROVED BUT THE QUARTER CLOSED LOWER, as the EMAE rose 0.8% m/m seasonally adjusted in June, cutting two consecutive months of declines, and advanced 2.7% y/y. As anticipated, it wasn't enough to prevent the second quarter from closing in negative territory. The sectoral picture remains one of two speeds: mining (15.6% y/y) and agriculture (4.6% y/y) together contributed 1.1 p.p. to y/y growth, while industry (1.9% y/y) and trade (0.8% y/y) barely moved and public administration subtracted again. In the first six months activity grows 1.9% y/y, well below the 4.5% at which 2025 closed.

WAGES STILL AREN'T RECOVERING, as private registered wages rose 1.9% m/m in June, matching monthly inflation, and after April's rebound have gone two months without beating prices. In the year they advance 14.5% against 16.8% CPI and y/y 29.6% against 33.5%. Total wages, however, rose 2.9% m/m and widened the gap versus May, when they had barely beaten inflation, though the boost came from outside the formal private sector: unregistered wages advanced 4.4% and public wages 3.4%, the latter driven by the university pay round. In the year the total rises 18.5% and 35.7% y/y. With the largest segment of the formal wage bill still losing to prices, consumption finds no traction.

CONSUMER CONFIDENCE ISN'T REBOUNDING, as UTDT's Consumer Confidence Index fell 1.1% in August to 40.2 points, a second consecutive decline though well below July's 4.8% slump. The entire drop came from the interior, which fell 3.8% while still holding the highest level (43.8 points), while Greater Buenos Aires rose 0.4% to 38.3 points, the lowest reading in the country, and CABA 0.1% to 39.9. By component, only the perception of the macroeconomic situation improved (3.1%), against declines of 3.3% in the personal situation and 4.0% in willingness to purchase durable goods and real estate. High rates and rising delinquency explain much of the deterioration, in line with wages that still aren't driving consumption.

THE TRADE SURPLUS HOLDS STEADY, with July's trade balance leaving a positive USD 2,115 M, in line with June. Exports rose 14.1% y/y to USD 8,854 M, decelerating from the prior month and with the improvement almost entirely explained by prices (12.4%) against volumes that grew just 1.5%. Energy was again the driver, jumping 97.8% y/y. Imports fell 1.7% y/y after rising in June, with declines in capital goods, parts and accessories, and consumer goods again reflecting activity that isn't taking off. In the year the surplus accumulates USD 16,080 M.

THE FISCAL SURPLUS CONTINUES, as after June's primary deficit, in July the National Public Sector returned to positive territory with a primary surplus of ARS 2.96 trillion and a financial surplus of ARS 0.24 trillion in a month loaded with Global and Bonar coupon interest payments. Spending drove the shift, falling 7.0% y/y in real terms and reversing June's increase, with the adjustment concentrated in social benefits and current transfers. Revenue fell 2.5% y/y in real terms. Net VAT came in just below inflation, though its tax component, more tied to domestic consumption, grew 5.7% in real terms and was the only sign of improvement, while the check tax fell 11.3% in real terms. In the first seven months the primary surplus accumulates 0.9% of GDP, far from the 1.4% annual target under the IMF program.

THE BCRA KEEPS SLOWING ITS PACE OF PURCHASES, buying USD 137 M over the four sessions of a week shortened by Monday's August 17 holiday, at a pace of USD 34 M per day and with USD 89 M concentrated on Thursday, extending a streak of 17 consecutive sessions with a buying balance, with agribusiness sustaining settlement above USD 100 M per day. So far in August purchases total USD 466 M, a daily average of USD 33 M that deepens the slowdown from July (USD 103 M per day) and comes in below June (USD 68 M) and May (USD 137 M). In the year they total USD 13,804 M. Gross reserves, meanwhile, closed at USD 50,655 M, up USD 1,159 M on the week and a high since September 2019.

THE DOLLAR TRACKED HIGHER WHILE THE BCRA INTERVENED, as the official exchange rate rose 0.6% on the week to close at $1,497.5, the same variation as in the month. Financial dollars moved somewhat more: the MEP closed at $1,519.8 and the CCL at $1,574.9, both up 0.9%, with the spread between them at 3.6%.

LIQUIDITY RETURNED TO THE SYSTEM, as the peso stock absorbed by the BCRA via repo had been falling and touched ARS 0.65 trillion on Thursday, but toward the end of the week liquidity appeared to normalize: on Friday the amount absorbed reportedly rose to ARS 2.1 trillion, well above the weekly average (ARS 0.8 trillion). Rates reflected this. Caución traded from the open below 25% and closed at 18.5% (VWAP 22.6% on BYMA), wholesale time deposits stood near 25%, something that won't show up in Friday's published TAMAR given the one-day lag, and interbank repo traded around 24%.

PESO CURVES ENDED LOWER IN DOLLAR TERMS, as the illiquidity that dominated most of the week weighed on the curves, with the dollar-linked/TAMAR dual leading the decline at -0.5%, followed by the fixed-rate/TAMAR duals (-0.7%) and dollar-linked, down 0.9%. Lecaps fell 1.2%, with the long end hit hardest, and closed yielding between 2.1% and 2.2% EMR. TAMAR and CER-linked notes fell 1.2%, with real rates rising: the short end moved from CER+2% to CER+5% and the long end from CER+9% to CER+10%. CER/TAMAR duals were hit hardest, down 2.2%. Friday's rate decompression didn't reach fixed-rate notes, which closed the session with fresh yield increases, while CER-linked notes did rebound on the day.

SOVEREIGN DEBT REMAINS TIED TO THE GLOBAL BACKDROP, as hard dollar debt fell 2.2% on average over the week and country risk rose 31 bps to 505 bps, after touching 535 bps on Thursday. The driver was external, with long-end U.S. rates at nearly two-decade highs, but the hit far exceeded the region's: the EMBI Latam widened 6 bps against 61 bps for the Argentine spread. The long end concentrated the declines, with the GD46 down 3.7% and the AL35 down 3.0%. On Friday, as U.S. yields stabilized, bonds rebounded 1.2% and country risk fell 30 bps. At these prices Bonars yield between 8.4% and 10.6% and Globals between 6.4% and 9.6%.

THE MERVAL EXTENDED ITS CORRECTION, falling 2.0% in dollar terms to close at USD 1,833, bringing its decline to 12.1% in August and 9.6% in the year. The hit was concentrated in financials (-4.8%), with BBVA down 8.3%, Banco Macro down 5.6% and Galicia down 4.2%, followed by industrials (-4.3%) and materials (-3.4%). Energy was the only refuge, up 2.5% led by YPF (+2.8%), along with consumer staples (+2.5%).

WEEK AHEAD

  • Today brings the UTDT Government Confidence Index, which had fallen to management-era lows in July.
  • Attention is focused on the peso market. The Treasury already swapped USD 1,344 M of the dollar-linked bill maturing at month-end for September and October instruments, with the lowest take-up of the year, so on Wednesday the 26th the D31G6 fixing arrives with USD 2,595 M outstanding.
  • On Thursday the 27th the Treasury faces an auction with ARS 13.9 trillion in maturities. That will show whether the economic team holds the line of easing stress in the peso market that emerged toward the close of last week, or returns to a contractionary bias on liquidity. The week's focus will be on the rollover rate and the cost at which the Treasury manages to renew.

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