DRIVEN BY FITCH'S RATING UPGRADE AND A MORE FAVORABLE EXTERNAL ENVIRONMENT FOR EMERGING MARKETS, local assets wrapped up a strong week — with the exception of equities, which continue to struggle to gain traction. Dollar bonds rose and the country risk closed near 500 bps, while the peso curve also performed well, with CER instruments leading the gains. On the exchange rate front, the BCRA started the month slowing its pace of purchases despite higher agricultural liquidations, while the official exchange rate came under greater upward pressure and interest rates edged slightly lower. March macro data confirm that activity recovered from February's slump, but appears to have lost momentum in April — a sign that the economy has yet to find a sustained recovery path. Against this backdrop, market expectations for 2026 are being revised toward a scenario of higher inflation, a lower exchange rate, and slower growth. This week's focus will be on the Treasury auction and the release of April's CPI, where a slowdown from the prior month is expected, though it will remain elevated.

ACTIVITY IMPROVED IN MARCH. Following the very weak February reading — when the EMAE fell 2.6% m/m — all indicators point to a rebound. Manufacturing output (IPI) broke an eight-consecutive-month losing streak — which included a 3.6% m/m drop in February — rising 3.2% m/m and 5.0% y/y in March, closing Q1 2026 with a 2.3% y/y contraction. Construction activity also posted a strong rebound in March, up 4.7% m/m — more than reversing the 1.2% m/m decline in February — and 12.7% y/y, the best reading since June 2025, accumulating a 3.9% y/y gain so far this year. Mining activity continues its upward trend, posting a 2.4% m/m and 10.4% y/y gain in March, accumulating a 6.4% y/y expansion in the first three months of the year.

TAX REVENUES CONTINUE TO FALL, as the strong March activity data has yet to translate into improved tax collection — April marked the ninth consecutive real-term decline. Total tax revenues fell 4.1% y/y in real terms. The only categories posting gains were the check tax (+4.3% y/y) and fuel taxes (+35% y/y); all other line items declined. Notably, export taxes fell 35% y/y — partly due to a reduction in the applicable rate — while import-related revenues fell 10% y/y. Labor market-linked taxes dropped 2.5% y/y, and VAT (DGI) posted a slight decline. For the first four months of the year, total tax revenues are down 7% y/y in real terms. This environment is pushing the Treasury to seek alternative revenue sources — such as privatizations — and/or to deepen primary spending cuts in order to preserve fiscal balance.

THE APRIL MARKET EXPECTATIONS SURVEY (REM) CONTINUED TO REVISE THE 2026 OUTLOOK, pointing to higher inflation, lower growth, but a larger trade surplus along with lower exchange rate and interest rate projections. The April inflation forecast stood at 2.6% m/m (markets are pricing in 2.5% m/m), unchanged from the prior survey, with a gradual deceleration to 1.8% m/m by August. The expected annual inflation for 2026 was revised slightly higher to 30.5% (+1.4 pp). In contrast, exchange rate and interest rate projections were revised downward: the wholesale dollar is seen averaging $1,410 in May (-$39 vs. the prior REM) and rising 1.9% m/m through June, before accelerating to 2.6% m/m in the second half of the year, closing December at $1,676 (vs. $1,700 in the March REM), implying a 15.8% year-on-year depreciation. On rates, the TAMAR is projected at 23.1% NAR for May (-2.9 pp) and 22.0% NAR for December (1.9% and 1.8% EMR respectively), implying negative real rates throughout the year. The 2026 GDP growth estimate was revised down 0.5 pp to 2.8% y/y. On the external front, exports were revised upward again, with the 2026 trade surplus now forecast at USD 16,506 M.

FITCH RATINGS UPGRADED ARGENTINA'S SOVEREIGN CREDIT RATING from CCC+ to B- with a stable outlook on Tuesday. The agency highlighted the structural improvement in both fiscal and external balances, the progress made on the reform agenda, and the sustained accumulation of reserves. Fitch also acknowledged the impact of the October 2025 midterm elections, which expanded the government's legislative capacity to advance key reforms, including labor market and mining sector liberalization. With the B- rating, Argentina exits the distressed debt category and enters the riskiest rung of the speculative grade tier, moving closer to the investment universe of High Yield funds. However, these funds typically require at least two rating agencies to upgrade an issuer before including it in their portfolios.

THE BCRA PURCHASED USD 330 M DURING THE WEEK, marking a sharp deceleration from April's pace (USD 61 M per day vs. USD 131 M), despite a slight pickup in agricultural liquidations (from USD 125 M per day in April to USD 130 M in May — still relatively low compared to seasonal expectations at this time of year). This likely reflects lower inflows from financial loans — the stock of local bank loans in foreign currency started the month on a declining trend, in contrast to the strong momentum seen in prior months — and/or an increase in demand, particularly from imports and likely from the unwinding of carry trade positions. As a result, gross reserves rose USD 1,549 M on the week, closing at USD 46,056 M, while net reserves remain negative at approximately USD 14,100 M under the IMF definition.

THE OFFICIAL EXCHANGE RATE ROSE 0.9% DURING THE WEEK, closing at $1,394.12 — 23.2% below the upper band ceiling of $1,717.98. Financial dollars, in contrast, declined: the MEP fell 1.0% to $1,425.96, while the financial exchange rate dropped 0.5% to $1,487.20, with the spread widening to 4.3%. Dollar futures contracts fell an average of 0.2% on the week, with implied depreciation averaging 1.8% m/m through July and 1.9% m/m further out. Implied rates ranged from 21%–26% NAR across the curve. Daily trading volume fell to USD 989 M on Friday from USD 1,628 M the prior week, while open interest declined to USD 4,308 M from USD 5,224 M.

CER INSTRUMENTS LED THE WEEK, with overnight rates returning to stabilize at around 20% NAR — the level at which they averaged throughout April — following the normalization of liquidity conditions. Against this backdrop, the peso curve had a positive week. CER instruments rose 1.9%, with real yields ranging from CER –14% at the short end (2026) to CER +2%/+8% in the 2027–2028 segment; the market is pricing in implied inflation of 2.5% m/m in April, an average of 1.9% m/m from May through October, and a cumulative 29.3% for 2026. Within this segment, the new Dual bond TXMJ9 (CER/TAMAR) rose 3.3% and has already tightened to CER +5.9% (from CER +7.3% at last week's auction). Lecaps rose 1.3%, with rates compressing at the short end, ranging from 1.7%–2.1% EMR across the curve. Dual bonds advanced 1.3%, with spreads over TAMAR at around 1%–2%, implying a TAMAR breakeven of 22% NAR against a current TAMAR of 22.8% NAR. Dollar-linked bonds were the weakest performers, rising just 0.7%, yielding devaluation +5%, and pricing in an implied exchange rate of $1,429 through June (1.4% m/m depreciation) and $1,526 through September (1.9% m/m depreciation).

THE CREDIT UPGRADE COINCIDES WITH A FAVORABLE EXTERNAL ENVIRONMENT FOR EMERGING MARKET DEBT, with the financing window reopening following a de-escalation of tensions in the Middle East. CABA took advantage of these conditions and issued USD 500 M in 10-year bonds under New York law at 7.38%, drawing demand of USD 3,000 M. On the corporate side, Pecom and Profertil also issued bonds totaling USD 267 M under local law. Appetite for the region was not limited to Argentina: Ecuador issued USD 1,000 M through the reopening of its 2034 and 2039 bonds at 8.5%, with demand of USD 7,000 M, while Bolivia returned to the markets after four years with USD 1,000 M in 5-year bonds at 9.75%, attracting USD 5,000 M in orders. The stronger demand for emerging market debt is key for Argentina's eventual return to international markets at reasonable rates.

SOVEREIGN DOLLAR BONDS HAD AN OUTSTANDING WEEK, driven by Fitch's upgrade combined with a favorable global environment for emerging markets. Prices rose 2.2% on the week, comfortably outperforming the 0.95% gain posted by comparable peers, compressing the country risk by 54 bps to 513 bps and narrowing the spread vs. the EMBI Latam by 37 bps to 257 bps. The Global bond curve led with an average gain of 2.3% — headed by the GD35 at +2.8% — while Bonares rose 2.0%, with the AL35 posting +2.3%. In terms of yields, Bonares trade at 7.1% YTM on the short end and 9.8% on the long end, while Globals trade at 6.1% and 9.2% respectively, with the 2030 legislative spread compressing from 2.4% to 1.8%. Bopreales showed less momentum (+0.9%), led by Series 3 (+2.1%), yielding between 4.4% and 7.8%. Provincials advanced 1.2%, led by Buenos Aires 2037 (+2.9%), offering yields between 6.6% and 11.6%. Corporates closed flat on average: local law bonds fell 0.3%, dragged down by Pan American Energy 2031 (-3.4%), while foreign law bonds rose 0.1%, lifted by Tecpetrol 2033 (+0.5%); the former yield an average of 4.9% YTM vs. 7.4% YTM for the latter.

THE MERVAL DECLINED 2.2% FOR THE WEEK IN PESOS and 1.5% in dollar terms, closing at USD 1,862, once again moving in the opposite direction of both global markets and the Latam index, which gained 0.6% on the week. Selling pressure was concentrated in energy — affected by the decline in crude oil prices — materials, and utilities, more than offsetting the positive performance of banks and communications. Among individual local stocks, the steepest declines were posted by YPF (-6.5%), Edenor (-6.2%), and Aluar (-5.5%), while VALO (+10.3%), Transener (+5.3%), and BBVA (+3.5%) led the gainers. ADRs listed on Wall Street showed a differentiated performance: they rose an average of 0.5%, with BBVA (+9.4%), Ternium (+8.1%), and Banco Macro (+6.7%) among the top performers, while MELI (-11.8%), Vista (-9.0%), and AdecoAgro (-5.5%) were among the weakest.

WEEK AHEAD. Today CABA's April CPI will be published and the Treasury auction conditions will be announced. The auction takes place Wednesday, facing ARS 9.4 trillion in maturities, mainly from LECER X15Y6. On Wednesday the 14th, national April CPI arrives, expected to decelerate to around 2.7% m/m from March's 3.4% m/m, above the 2.5% m/m market consensus.