OPTIMISM LOOKS FOR SUPPORT. After several months trading above emerging market peers, Argentine bonds corrected and the market turned its focus back to local fundamentals, with activity still failing to consolidate and 2027 starting to come into view. Sovereign debt fell, country risk approached 450 bps, and the peso curve remained under pressure from lower system liquidity and the CABA CPI, which showed an acceleration that led the market to adjust inflation expectations upward. On the FX front, the official exchange rate resumed its upward path while the BCRA deepened the slowdown in its pace of purchases, with FX demand gaining momentum. July tax collection improved slightly, though activity-linked taxes remained below inflation. The positive note came from the renewal of the swap with China, extended to five years, which adds predictability to the reserves scheme. The Merval held steady in dollar terms, despite pressure on energy stocks from falling oil prices. Focus will be on the July national CPI and whether the CABA acceleration was merely seasonal, while the Treasury faces an auction amid tighter liquidity conditions.

ARGENTINA RENEWED THE SWAP WITH CHINA. The currency swap agreement with the People's Bank of China was set to expire last Thursday, and the BCRA managed not only to renew it but to extend the term from three to five years, through 2031. The amount was kept at 130 billion yuan (USD 19 billion), with an activated tranche of 35 billion yuan (USD 5 billion) available for immediate use. The agreement, in place since 2009, is part of gross international reserves and allows Argentina to pay for imports from China in yuan instead of dollars, easing pressure on reserves and widening the BCRA's room to maneuver. The longer term provides predictability and removes the risk of renegotiations every three years, something previous renewals had failed to achieve.

TAX COLLECTION IMPROVED SLIGHTLY. After June's real 7.4% y/y decline, which had interrupted the recovery seen in May (+2.3% y/y real, the first positive reading after nine straight months of decline), July tax revenue grew 35.1% y/y in nominal terms, slightly above y/y inflation. The improvement was almost entirely explained by income tax (+64.7% y/y), boosted by the rescheduling of tax return deadlines that had fallen in June in 2025. Fuel taxes (+67.8% y/y) and personal assets tax (+69.2% y/y) also contributed. On the other hand, import duties fell 2.3% y/y and debits and credits rose just 18.7% y/y, both below inflation. With this result, tax collection over the first seven months of the year has posted a real decline of nearly 4%.

CABA INFLATION ACCELERATED. Last Friday's Buenos Aires City CPI for July showed a 2.9% m/m increase, a sharp acceleration from June's 1.8%, which had been the best reading of the year. The jump was driven by the seasonal component, which surged 10.9% m/m on the back of winter break effects on tourism, recreation and transport. Services rose 3.8% m/m versus 1.4% for goods. With this result, CABA inflation stands at 19.4% year-to-date and 33.2% y/y. While the City reading tends to anticipate the national CPI trend (due out this week), the consultancies surveyed by the BCRA kept their forecast at 2.0% m/m for the INDEC figure, suggesting the seasonal jump had a smaller impact at the national level.

THE REM CUT GROWTH EXPECTATIONS AGAIN. The August Market Expectations Survey (REM) kept the July inflation forecast at 2.0% m/m (core 1.8%), with a gradual slowdown to 1.8% m/m in August and September and 1.7% in October. Annual inflation for 2026 stood at 29.8%, little changed from the prior month. On FX, the median forecast points to $1,652 for December (14.1% y/y), and TAMAR is projected at 22.4% NAR for August and 22.2% for December. The most relevant shift came from activity: the market cut its GDP forecast to 2.7% y/y (0.4 p.p. below the July REM), incorporating a 0.4% q/q s.a. contraction in the second quarter, confirming the recovery remains unconsolidated. On the external front, exports remain the anchor of the positive scenario, with a trade surplus projected at USD 23,434 M.

THE PACE OF FX PURCHASES SLOWED. The BCRA posted net purchases of USD 111 M for the week, averaging USD 22 M per day, deepening the slowdown from July's pace (USD 103 M per day). Agro sustained a solid pace of settlements, but FX demand kept gaining momentum. Year-to-date purchases total USD 13,448 M. Gross reserves closed at USD 49,455 M, up USD 1,859 M on the week, explained by the seasonal rebuilding of reserve requirements at the start of the month and the revaluation of gold prices.

THE OFFICIAL EXCHANGE RATE ROSE. The official FX rate gained 0.7% on the week to close at $1,498.5, reversing the prior week's decline and accumulating a 0.7% rise for the month. Financial dollars traded steady: the MEP closed at $1,523.5 (+0.3%) and the CCL at $1,578.6 (+0.2%), while the spread between them held at 3.6%.

PESO RATES REMAINED UNDER PRESSURE. The peso curve stayed pressured during the week amid tighter liquidity, with the BCRA's repo stock falling to a low of $0.81 B, well below July's average of $2.52 B, before recovering to $1.09 B by Thursday. Lecaps reflected this dynamic: the curve steepened, with the short end rising an average 0.2% and yielding 1.9%/2.1% EMR, while the long end fell 0.4% and yields 2.1%/2.2% EMR. Short-end CER bonds rose an average 0.3% after the CABA CPI surprise led the market to adjust inflation expectations upward, with a breakeven of 2.1% m/m for July. The long end fell 0.6%. Dollar-linked bonds led the week, up 0.2%, pricing in an implied exchange rate of $1,646 by September. The DLK/TAMAR dual bond TMVE8 rose 0.5% in its first week of trading. By contrast, CER/TAMAR dual bonds fell an average 0.9%.

HARD DOLLAR DEBT CORRECTED. Sovereign hard dollar debt fell an average 1.0% on the week, with country risk rising 22 bps to 452 bps. After two months trading above emerging market peers on the back of the ratings upgrade and the financial program, bonds fell in line with the correction as domestic issues began to gain weight, in a week when the UST10Y touched year highs, though Fed rate hike expectations eased toward the close. Long-dated bonds were hit hardest, falling between 1.3% and 2.3%, while the short end showed more resilience. At these prices, Bonares yield between 6.9% and 9.7%, and Globales between 5.5% and 8.9%. The Merval, meanwhile, closed nearly flat in CCL dollar terms (-0.2%). Energy was the hardest-hit sector, pressured by falling oil prices (YPF fell 2.9% and Vista 3.0%), while industrials and communications led the gains.

WEEK AHEAD

  • Today the terms of the Treasury auction will be announced, to be held on Wednesday the 12th, facing maturities of just $4.5 trillion. With liquidity somewhat tighter, and considering that maturities at the end of August rise to $16.6 trillion, the Treasury is likely to achieve a rollover above 100%, continuing its strategy of offering indexed debt to extend maturities.
  • The week's key data point will be the July national CPI, released Thursday the 13th, in a context where inflation has been sustaining the slowdown that began in April.