No international market until 2028?

THE WEEK OPENED WITH THE 2026-2027 FINANCIAL PROGRAM, in which the government estimates it will not need to tap international markets, as it expects to cover financing needs through Treasury purchases from the BCRA, local debt issuance and multilateral lenders. This remains a challenge and does not rule out FX and interest rate pressure, particularly in an election year when portfolio dollarization tends to rise. A strong harvest, favorable international prices, and continued growth in net FX supply from the energy sector will be key. Market reaction was measured, and sovereign dollar bonds extended their rally, pushing country risk close to 400 bps. The exchange rate held stable and financial dollars eased slightly, while the BCRA maintained its pace of purchases, though reserve accumulation remained limited. In pesos, the fixed-rate curve compressed at the short end, consolidating the liquidity normalization that had been building since the prior week. The Merval tracked the global trend and posted a solid gain led by banks and energy. Next week's focus will be on June CPI and fiscal results, and on the Treasury auction, which will include the debut of the new AO29.

ARE THE DOLLARS THERE? MECON presented the financial program for the remainder of 2026 and all of 2027. For 2026, financing needs are estimated at USD 19,200 M versus sources of USD 22,900 M, leaving a surplus of USD 3,700 M carried over as a cushion into 2027. Sources assume Treasury purchases from the BCRA of USD 6,700 M -USD 5,700 M already purchased-, intra-public-sector rollover of USD 800 M, multilateral-guaranteed loans of USD 4,000 M -USD 2,000 M from the World Bank at 6.3% and USD 1,200 M from the IDB at 7.75%-, IMF disbursements of USD 1,900 M, other multilaterals for USD 2,800 M, local issuance of USD 6,000 M -USD 4,000 M already placed via the 2027 and 2028 Bonars, with the remaining USD 2,000 M via a new AO29 carrying a 6% monthly coupon- and privatizations of USD 800 M. For 2027, needs and sources both total USD 24,900 M, with BCRA purchases of USD 4,900 M, intra-public-sector rollover of USD 1,800 M, IMF for USD 1,700 M, multilaterals for USD 4,200 M, local issuance of USD 5,000 M, a bilateral loan of USD 2,000 M and privatizations of USD 1,500 M. Caputo noted that returning to international markets is "an option, not a goal" and clarified this does not include the swap with the US. This is the roadmap the government envisions through the end of its term, though it is not set in stone. To achieve it, the BCRA will need to sustain its current pace of purchases in a year of more active demand, meaning supply must be as dynamic as this year, which benefited from transitory effects -such as the jump in oil prices- that could otherwise pressure the exchange rate. The Treasury will also need to roll over all local-currency debt maturities, requiring higher interest rates. At the same time, placing USD 5,000 M in the local market mid-election cycle is no small challenge.

BREAKING BELOW 2%? Ahead of tomorrow's National CPI release, Buenos Aires City CPI offered a good precedent, posting 1.8% m/m, 2 bps below May and the lowest in 13 months. Core CPI showed a similar trend at 1.9% m/m, while Regulated prices rose 2.0% m/m and Seasonal prices just 0.1% m/m. Reweighted under INDEC's national methodology, retail inflation could come in near 1.7% m/m -we maintain our estimate at 2.0% m/m-.

THE BCRA EASES ITS PACE OF PURCHASES. In a short week, the BCRA held last week's pace, buying USD 140 M in the official market and accumulating USD 290 M so far in July. The daily average now stands at USD 48 M, slowing from June's USD 68 M and well below May's USD 137 M. This moderation came despite agro settlement holding near USD 150 M per day -even slightly better than June-, reflecting stronger demand -goods and services imports, external asset formation- or lower financial loan inflows. If sustained for the full month, July would post net purchases of USD 1,015 M, with agro settling USD 3,800 M and net demand from other items at USD 2,800 M, the highest since September 2025.

RESERVES STABLE DESPITE DEBT PAYMENTS. Between FX market purchases and multilateral loan disbursements, international reserves rose USD 481 M on the week, closing at USD 48,722 M. This week will show the full impact of debt maturity payments of nearly USD 4,000 M, since the portion paid to local investors affects dollar deposits and reserve requirements.

STABLE EXCHANGE RATE. After several weeks of upward pressure, the official exchange rate moved just 0.2% last week, closing at $1,490.9, up 0.7% on the month. Financial dollars eased slightly: MEP fell 0.5% to $1,525 and CCL fell 0.5% to $1,572, with the spread steady at 3.1%. Futures followed with an average 0.5% decline, implied devaluation on the curve at 1.8%-1.9% m/m and an implied NAR of 24%-25%. Traded volume rose 25% versus the prior week and open interest closed at USD 3,879 M (+5.8%).

THE FIXED-RATE CURVE COMPRESSES. Lecaps led the week, rising 1.2%, followed by CER-linked bonds (+1.1%), duals (+1.1%) and dollar-linked bonds (+0.7%). The most notable move was in the short end of the fixed-rate curve, which compressed slightly: the S31L6 went from 1.7% to 1.5% EMR, while the rest of the curve went from 1.9% to 1.8% EMR. Real rates on CER-linked bonds range from CER-1.2% at the short end to CER+8.2% at the long end. Implied inflation stands at 1.9% m/m for July, easing to 1.1% between August and October and rising to 1.5% from November onward, for a cumulative 28.8% in 2026. Dollar-linked bonds yield devaluation of +5.5% at the short end (D30S6) and +7.7% at the long end (TZV28), with an implied exchange rate of $1,490 for July rising to $1,540 in September. The duals' TAMAR breakeven stands at 21.8% (TTS26) and 21.2% (TTD26).

COUNTRY RISK AT NEW LOWS. In a week marked by coupon and amortization payments, foreign-currency sovereign debt closed up 0.4%, outperforming comparables, up 0.2%. Bonars led with a 0.7% gain, while Globals advanced a more modest 0.2%. AL29 was the best performer, up 1.1%, while GD30 was the only one to close in the red, down 0.1%. Country risk closed at 402 bps, a new low for the Milei administration, and the spread versus the EMBI Latam compressed another 11 bps to 152 bps, continuing recent weeks' trend. At these prices, Bonars yield between 5.9% and 9.0%, while Globals yield between 5.4% and 8.3%. BOPREAL bonds fell 0.4% on the week, with broad declines across most series. Bopreal Series 1 A posted the biggest drop, down 1.6%, while Bopreal Series 4 A moved against the trend, up 0.8%. At these prices, the BCRA curve yields between 3.0% and 7.1%. Provincial bonds gained 0.5% on the week. Buenos Aires 2037 was the best performer, up 1.0%, while Rio Negro 2028 fell 1.6%. The segment offers yields of between 5.3% and 10.6%. Corporate bonds gained 0.1% on the week, led by Argentine-law bonds, up 0.5%, while New York-law instruments closed unchanged. Under local law, Pan American Energy 2028 led gains, up 1.8%, while under New York law YPF 2029 led, up 0.2%. New York-law corporates offer an average yield of 7.2%, versus 4.6% for local-law instruments.

A POSITIVE WEEK FOR EQUITIES. The Merval closed a strong week, up 3.9% in pesos and 4.4% in CCL dollar terms, reaching USD 2,087. At the sector level, energy and banks (+5.0%) led gains. Among local stocks, Sociedad Comercial del Plata (+10.9%), BBVA (+7.9%) and YPF (+7.1%) led the advance, while IRSA (-1.7%), Loma Negra (-1.6%) and Cresud (-0.9%) posted the biggest declines. For New York-listed shares, the average weekly gain was 3.6%, led by BBVA (+8.8%), TGS (+8.1%) and Telecom (+8.0%), while Globant (-7.8%), IRSA (-7.8%) and Loma Negra (-2.0%) were the worst performers.

EXPECTATIONS IMPROVE. The BCRA's latest market expectations survey (REM) showed a further improvement in the macro outlook. On inflation, consensus expects June at 2.0% m/m, repeating in July before easing gradually to 1.8% in the second half. This would put 2026 CPI at 28.8% y/y, 1 pp below the May estimate. On the official exchange rate, following June's rise, the market expects a 2.2% m/m increase in July, holding a 2.4% m/m pace in the second half to close December at an average of $1,666. On the TAMAR rate, no changes are expected, seen holding at 1.9% m/m for the rest of the year. The nominal race in the second half would thus be led by the exchange rate, followed by TAMAR and, close behind, CPI. On GDP, consensus estimates 2.9% y/y growth for this year and next, while foreign trade prospects kept improving, with a trade surplus estimate of USD 23,730 M for 2026 -up from USD 20,544 M in the May survey- and USD 22,200 M for 2027.

WEEK AHEAD

• The week starts Monday with the Treasury auction call, to be held this Wednesday, covering maturities of nearly $3 trillion —not a significant challenge.
• Tuesday brings June CPI, a key data point after the disinflation trend of recent months.
• Thursday brings June's fiscal result, with markets watching whether tax revenue remains pressured by weak activity.
• The week closes Friday with the Construction Cost Index (ICC) and the June Wholesale Price Index.