DEFLATED, BUT CONTAMINATED. The week brought good news on the local front, with inflation decelerating and gains in the ARS curves, though dollar-denominated assets failed to follow suit. As expected, April's CPI broke a 10-month rising streak, helped by stabilization in food prices, though it remains elevated — especially considering FX and wage dynamics. The Treasury took advantage of the environment to secure financing at lower rates and extend duration beyond the electoral year. The ARS curve extended the prior week's compression, led by CER instruments, with rates continuing to fall following the auction and the inflation print. At the same time, the BCRA accelerated its pace of purchases relative to the start of the month, supported by agricultural sector settlements, though still below April's average in a context of a stable exchange rate. In contrast, dollar-denominated sovereign bonds and equities closed lower amid an adverse global environment that weighed on emerging markets. The country risk rose again, moving away from the ~500 bps levels of the prior week. Next week's focus will be on activity, wage, and fiscal data, against a backdrop of deteriorating tax revenues and wages continuing to lag inflation.

INFLATION SLOWS IN APRIL. The National CPI rose 2.6% m/m — in line with market expectations and, for the first time since November, without an upside surprise — well below the 3.4% m/m recorded in March, marking the first significant deceleration since May of last year. The monthly increase was driven by regulated prices, which rose 4.7% m/m — boosted by hikes in fuel, education, and utilities — while core CPI rose 2.3% m/m and seasonal CPI was flat. With this result, CPI has accumulated a rise of 12.3% year-to-date and 32.4% over the past twelve months. We expect inflation to continue easing in May, though it would remain above 2.0% m/m — well above the pace of FX depreciation — which would further erode the real exchange rate, posing a risk heading into the second half of the year when we expect lower FX inflows.

THE BCRA KEEPS BUYING, DRIVEN BY AGRICULTURAL SETTLEMENTS. The BCRA purchased USD 596M during the week, accelerating the pace relative to the previous week and bringing the monthly accumulated total to USD 926M over 10 business days (USD 93M/day), below April's average of USD 138M/day. The agricultural sector remained the primary driver, settling USD 850M during the week and USD 1.5B so far this month, suggesting that net demand from other sectors is on the rise. Following these operations, gross reserves closed at USD 46,024M, down USD 37M from the prior week's close, pressured by a decline in foreign currency reserve requirements and other debt payments. Net reserves remain negative at around –USD 14,100M under the IMF definition.

STABLE EXCHANGE RATE. The official exchange rate rose just 0.1% during the week, closing at ARS 1,395.35 — 24.1% below the top of the band. The MEP dollar was stable, closing at ARS 1,426.43, while the financial exchange rate rose 0.2% to ARS 1,490.47, with the MEP-financial spread widening to 4.5%. Implied depreciation in futures stood at around 1.4% m/m in May, 1.7% m/m in June, and 1.8% m/m in July, with implied rates ranging from 20% to 28% NAR across the curve. Both traded volume and open interest showed modest changes, closing the week at USD 751M and USD 4,358M, respectively.

THE TREASURY FINANCES ITSELF AT LOWER RATES. In the latest auction, the Treasury continued its strategy of absorbing ARS liquidity with longer-dated instruments, taking advantage of ample peso liquidity. With a rollover of 110% — 93% excluding TX26 and TX28 payments from last Monday — and a weighted average term of 530 days, the standout feature was the sharp compression in the weighted average rate of CER-adjusted instruments, which fell from CER+7.9% in April to CER+4.98%, driven primarily by strong demand for Dual bonds (43.8% of total awarded), while fixed-rate instruments accounted for 42%. In fixed rate, the September Lecap was placed at 2.09% EMR, slightly above secondary market levels. In Duals, TXMJ8 cut at CER+4.0% (below secondary) and TAMAR+7.0% (in line), while TXMJ9 cut at CER+6.2% (secondary: 5.96%) and TAMAR+9.0% (secondary: 8.8%). This preference for longer-duration instruments allowed the Treasury to place nearly half of the total amount in post-2027 maturities, extending the repayment profile beyond the electoral year and reducing short-term refinancing pressure. In dollars, AO27 and AO28 each awarded the maximum of USD 250M at IRR of 5.12% and 8.24%, respectively, bringing total issuance to USD 2,779M across both instruments.

RATES CONTINUE TO COMPRESS. The ARS curve extended last week's rate compression, following Wednesday's auction and the April inflation print. CER instruments led with gains of 0.8%, with real rates ranging from CER –11% at the short end (2026) to CER +2%/+8% toward 2027–2028; the market is pricing implied inflation of 1.9% m/m on average for May–October, and 1.6% m/m for November 2026–May 2027. Lecap rose 0.8%, with rates compressing slightly from 1.8% to 1.7% EMR at the short end and from 2.1% to 2.0% EMR at the long end. Dual bonds advanced 0.3%, with margins over TAMAR of around 0%–1.8%, implying a breakeven TAMAR of 19.9%–21.6% NAR versus a current TAMAR of 22.8%. Dollar-linked bonds were roughly flat, yielding depreciation +5%/+6% and pricing in an implied exchange rate of ARS 1,418 toward June (1.0% m/m depreciation) and ARS 1,521 toward September (1.9% m/m depreciation).

MAY OFF TO A STRONG PACE OF INTERNATIONAL ISSUANCES. The pace of international debt issuances by provinces and corporates accelerated again this week. The highlight was Pampa Energía, which placed USD 500M due 2037 at a rate of 7.6%. This adds to recent deals by CGC (USD 200M at 11.9%; due 2030) and the City of Buenos Aires (USD 500M at 7.4%; due 2036), totaling USD 1,200M. Combining issuances under local and foreign law, total placements reach USD 1,614M in the first half of May.

SOVEREIGNS UNDER PRESSURE. Hard dollar sovereign debt fell an average of 1.8% during the week, partly driven by an adverse global environment with higher yields on the US sovereign curve — though comparable EM sovereigns and CCC corporates posted smaller declines. Specifically, comparable EM sovereigns fell 0.16% over the week, while CCC corporates narrowed their spread by 73 bps to 236 bps relative to Argentina. The country risk closed at 538 bps, about 25 bps above the prior week. Bonares fell 2.0% and Globals 1.8%, with AL41 and AL35 the hardest hit (both -2.4%). At current prices, Bonares offer yields of 7.7%–10.3% and Globals 6.2%–9.6%. The legislative spread held at 2.1% for GD30/AL30. Bopreal bonds lost 1.3%, with the steepest decline in Series 3 (-2.7%); yields range between 4.7% and 7.8%. Sub-sovereign bonds fell 0.3% on the week, led by Buenos Aires 2037 (-1.0%) and Neuquén 2030 (-0.6%), with the provincial curve ranging from 5.0% to 11.9%. Corporates also lost ground, down 0.3% for the week — instruments under New York law fell 0.4% while those under Argentine law declined 0.1%. In the foreign-law segment, energy sector declines stood out, led by Pampa 2037 (-1.8%), while under local law Pan American Energy 2024 saw the steepest drop (-4.0%). Overall, local-law instruments yield an average of 5.0% and international-law instruments 7.4%.

EQUITIES POST ANOTHER DECLINE. The Merval fell 2.2% in pesos and 2.4% in dollars, closing at USD 1,817, in line with Brazil (-5.1%) and Latam (-2.9%). This marked the index's fourth consecutive weekly decline, now 20.4% below the early-2026 high of USD 2,187. Selling pressure was concentrated in construction, utilities, and banks, while the energy sector provided support amid rising oil prices. The largest declines were in ByMA (-10.7%), TGN (-10.7%), and Transener (-10.4%), while Aluar (+3.0%), YPF (+3.0%), and Telecom (+2.2%) led the gainers. ADRs listed on Wall Street fell 2.6% on average, with Ternium (-8.8%), Bioceres (-8.8%), and Supervielle (-5.9%) leading losses, and Vista (+10.9%) and YPF (+3.0%) posting the strongest gains.

WEEK AHEAD

• The macro agenda is packed this coming week. On Monday, April's fiscal results will be published against a backdrop of deteriorating tax revenues, along with March wages, which have lagged inflation for the sixth consecutive month.
• Tuesday brings April's Construction Cost Index (CCI) and Wholesale Price Index (WPI), two indicators that again posted upside pressure in March.
• On Wednesday April's trade balance is expected to show continued improvement, supported by higher agricultural settlements and declining imports — reflecting an economy that has yet to recover momentum.
• On Thursday, the EMAE (monthly economic activity estimator) for March will offer signals on whether activity is beginning to pick up.

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