Inflation accelerates and reforms move forward. The week left a constructive tone for local assets. Sovereign bonds in dollars rebounded, while equities posted further declines. In parallel, the official exchange rate deepened its downward trend, even as the BCRA accelerated purchases in the official market. At the same time, in the week’s auction, the Treasury once again withdrew pesos from the system, leaving liquidity somewhat tighter, which was reflected in firmer short-term rates. Even so, ARS-denominated curves remained resilient, with better performance in Duales and CER-linked bonds and a more moderate dynamic across the rest of the curve. On the political front, a relevant signal emerged with the Senate’s approval in principle of the labor reform, which must now be debated in the Lower House. As anticipated, the negative development came from inflation, as CPI accelerated again in January and has now risen for eight consecutive months — a dynamic that, in a context of nominal FX appreciation, could begin to raise questions about exchange-rate competitiveness. In a shortened week, attention will focus on January’s fiscal result, following the deterioration in tax revenues recorded in the first month of the year. In addition, the Wholesale Price Index and the Construction Cost Index will be released, two key references for tracking cost and price dynamics in an economy where disinflation has yet to consolidate.

The labor reform advances. The bill obtained approval in principle in the Senate with 42 votes in favor and 30 against, incorporating 28 modifications relative to the original draft. Among the most relevant changes, the severance framework was redefined: the calculation base will exclude items such as the 13th salary, vacations, bonuses and tips; a cap equivalent to three collective bargaining salaries was established; and installment payments were authorized — up to six installments for large firms and twelve for SMEs. In parallel, the reduction in employer contributions was limited to 2.5% for SMEs and 1% for large companies, while no progress was made on cutting the corporate income tax rate, with only the previously envisaged elimination for real estate maintained. The text also preserves the Medium Investment Incentive Regime (RIMI), the “dynamic wages” scheme, the Labor Assistance Fund, and provisions aimed at greater flexibility in working hours and vacation scheduling, together with a union fee capped at 2%. The project will now be debated in the Chamber of Deputies.

Inflation accelerates again. National CPI rose 2.9% m/m and 32.4% y/y in January, marking the eighth consecutive monthly increase and exceeding analysts’ expectations, which had pointed to 2.4% m/m in the latest REM survey and 2.1% m/m a month earlier. The monthly increase was driven by seasonal prices, which accelerated to 5.7% m/m — with vegetable prices rising nearly 30% m/m — more than offsetting the moderation in regulated prices and core CPI, which rose 2.4% m/m and 2.6% m/m, respectively, down from 3.3% m/m and 3.0% m/m in December. For February and March, we expect inflation of no less than 2.5% m/m, driven by regulated prices and some seasonal components such as education. The persistence of inflation in a context of nominal FX appreciation erodes peso competitiveness and could generate greater tension in the FX market over the medium term.

The BCRA continues to accumulate reserves. The BCRA extended its uninterrupted streak of net purchases in the official market, acquiring USD 615 M during the week — nearly double the previous week — bringing February’s net purchases to USD 932 M and the year-to-date total to USD 2,082 M. Accumulation took place even as the exchange rate continued to decline, amid relatively stable agricultural liquidation flows (around USD 70 M per day) and additional FX supply linked to corporate bond placements and financial loans. In this context, gross reserves increased by USD 218 M during the week to USD 45,158 M. Net reserves, however, remain negative at around USD 19.300 M under the IMF definition, while under the traditional definition the negative balance stands near USD 2.400 M.

Searching for a floor. The official exchange rate deepened its decline, falling 2.5% during the week to close at ARS 1,395.4, leaving it 13.6% below the upper bound of the FX band. Financial dollars followed with a more moderate decline of 1.5% in the MEP and 1.4% in the CCL, closing at ARS 1,422.3 and ARS 1,470.8, respectively. As a result, the MEP–CCL spread widened to 3.4%. Lower hedging demand was also reflected in FX futures, which declined 2.6% over the week, while traded volume increased by USD 156 M and open interest rose by USD 295 M. Contracts now price in an implied devaluation of 2.5% m/m in March and 2.2% m/m on average for the remaining maturities, with implied rates around 30% NAR.

The Treasury sustains a high rollover. In the latest auction, the Treasury rolled over 123.4% of maturities — which totaled approximately ARS 7.3 trillion — thereby absorbing close to ARS 1.7 trillion from the system. While validated rates were broadly in line with the secondary market, with a weighted average 33.5% NAR, allocation showed a marked preference for the short end of the curve: 77.3% of the awarded amount was concentrated in instruments maturing between April and July, resulting in an average tenor of just 150 days. The strong concentration in short maturities suggests limited appetite to extend duration and, should this dynamic persist, the Treasury’s maturity profile could become more demanding in coming months. Following this auction, maturities amount to ARS 18 trillion in March and ARS 29.1 trillion in April.

Tighter liquidity and higher rates. Following the auction in which the Treasury absorbed ARS 1.7 trillion from the system, short-term rates moved higher relative to the previous week: the overnight repo averaged 34.7% NAR (vs. 25.3% previously) and the Repo stood at 35.4% NAR (vs. 24.4% previously), reflecting reduced liquidity in the money market. Despite this adjustment at the front end, the week was favorable for ARS-denominated debt, with a more pronounced improvement on Friday, coinciding with the settlement of the auction. Dual bonds outperformed, rising 2.8% on the week and yielding around TAMAR +4%. CER-linked bonds also delivered a solid performance — partly supported by an inflation print that surprised the market — advancing 2.7% over the week. At these levels, they yield CER +4% in the 2026 segment and CER +7% in longer maturities, pricing in 2% m/m inflation between February and April and a cumulative 24.9% increase for 2026. The fixed-rate curve lagged somewhat, rising 2.5%, with yields compressing to around 31% NAR (2.6% EMR) in the long end, while the short end remains near 34% NAR (2.8% EMR). Within this segment, Bonte 2030 stood out once again, climbing 4.2% during the week. Lastly, dollar-linked bonds remained under pressure, declining 2.6% amid the drop in exchange rates. They now yield devaluation +2.5% and price in an implied one-off adjustment of 5.5% through April.

Rebound in sovereign debt. Sovereign bonds in dollars posted a weekly rebound, modestly outperforming peers, supported by the broader improvement across emerging markets, the Senate’s approval in principle of the labor reform, and continued BCRA purchases. Sovereigns advanced 0.9% on average during the week, and country risk closed at 516 bp. Gains were led by Globales and Bonares, with AL30 rising 1.2% and GD35 up 1.1%, while comparables gained 0.7%. At these levels, the Globales curve retains a markedly positive slope, with yields ranging between 5.5% and 8.9% YTM, while Bonares trade between 7.3% and 9.5%. Within the BCRA segment, Bopreal bonds declined 0.4%, with a sharper drop in Series 3 (-1.8%), and YTMs in the 4.4% to 9.8% range. In sub-sovereigns, prices rose 0.6% on average, with YTMs between 5.7% and 11.2%; Chaco 2028 stood out (+4.6%), while Buenos Aires 2037 gained 0.4%. Finally, corporates advanced 0.2% over the week, with Edenor 2030 up 0.7%; foreign-law YTMs range between 6.0% and 9.5%, and between 4.5% and 9.0% in the local market.

Merval diverges from LatAm. The Merval declined again, driven by industry, construction and banking stocks. Specifically, it fell 8.1% in pesos and 4.4% in dollars. As a result, it closed at USD 1,915 and is now down 4.4% year-to-date in dollar terms. The steepest declines were recorded in BBVA (-7.8%), Galicia (-6.8%) and Cresud (-6.4%), while gains in TGN (+9.9%), Ternium (+6.0%) and LOMA (+4.1%) partially offset the losses. As for Argentine equities listed on Wall Street, the average weekly decline reached 3.3%, led by Globant (-17.7%), BBVA (-9.9%) and Cresud (-8.3%), while Bioceres posted a 3.3% rebound.

WEEK AHEAD:

• On Wednesday, the January fiscal result will be published, against a backdrop of weaker tax revenues in the first month of the year.
• On Thursday, the January Construction Cost Index (ICC) and Wholesale Price Index (IPIM) will be released, two indicators that gain importance in an environment where price dynamics continue to show persistence.
• In parallel, the goods trade balance will be announced, following the recovery in the surplus observed in the final quarter of 2025.