.svg){kind=small}
.svg){kind=small}
.jpeg)
THE COSTS OF STAGFLATION. Local assets had a negative week, with broad-based declines in bonds and equities, a slight uptick in peso-denominated rates, and upward pressure on the exchange rate for the first time this year. The BCRA's strong purchasing pace — driven by solid trade surpluses and higher financial dollar inflows — failed to offset weak activity, employment, and inflation data pointing to a stagflationary environment that is eroding consumer confidence and the government's approval ratings. This week, attention will focus on exchange rate dynamics — given that demand typically rises at month-end — and on the Treasury auction, which faces maturities of ARS 7.9 trillion.
ECONOMIC ACTIVITY CONTRACTED. In February, GDP-proxy activity fell 2.6% month-over-month and 2.1% year-over-year. As in recent months, the best-performing sectors were agriculture (+8.4% y/y), mining (+9.9% y/y), financial intermediation (+6.0% y/y), and fishing (+14.8% y/y), while the rest of the economy declined — most notably manufacturing (–8.7% y/y), commerce (–7.0% y/y), and construction (–0.7% m/m). Over the first two months of the year, cumulative activity is down 0.2% versus the same period in 2025. The weakness complicates the fiscal outlook, weighs on the labor market, and undermines confidence in the government.
THE TRADE SURPLUS WIDENED FURTHER. In March, the goods trade balance posted a surplus of USD 2,523M — more than four times the year-ago level. Exports rose 30% y/y (volumes +25% y/y, prices +4.0% y/y), while imports edged up just 1.7% y/y (price increases of 5.8% y/y were offset by a 3.9% y/y decline in volumes). For Q1 2026, the cumulative trade surplus reached USD 5,508M, well above the USD 1,060M recorded in the same period last year, driven by a 17% y/y jump in exports and a 7% y/y decline in imports.
THE FX MARKET REMAINS WELL-SUPPLIED. The high trade surplus and increased financial dollar inflows more than offset net demand from goods, services, and external asset purchases, enabling the BCRA to rebuild international reserves. March FX Balance data confirmed this. The BCRA purchased USD 1,671M during the month, supported by USD 1,737M in settled trade surplus and USD 2,590M in financial loans, which more than covered net outflows from services and income (including USD 700M in profit remittances) and USD 800M in net dollarization. For Q1 2026, BCRA net purchases totaled USD 4,400M, backed by USD 5,700M in settled trade surplus and USD 7,400M in net loans — more than enough to absorb USD 4,400M in net services and income outflows and USD 4,300M in net external asset demand.
OFFSHORE ISSUANCE IS PICKING UP. April has seen notable activity in the primary market. Vista Energy opened the month placing USD 500M at 11 years at 7.88% — one of the longest tenors of the year — followed by Edenor with USD 550M at 7 years at a yield of 9.75%, in line with secondary market levels. On the sub-sovereign side, Chubut returned to international markets for the first time in over a decade, placing USD 650M at 10 years at 9.45% under New York law, with strong investor demand. Month-to-date, hard-dollar issuance from corporates and sub-sovereigns totals USD 1,866M, dominated by foreign-law instruments (USD 1,713M) over local-law (USD 152M), already surpassing February's total (USD 882M) and March's (USD 343M), though still well below November's peak (USD 3,991M).
THE BCRA CONTINUES BUYING AT A STRONG PACE. The BCRA purchased USD 745M in the official FX market during the week, driven by agricultural sector settlements of USD 664M. Month-to-date in April, net purchases total USD 2,379M — USD 149M per day, nearly double March's daily pace — supported by agricultural liquidations of almost USD 2,000M, some 20% above March levels. These operations allowed the BCRA to add USD 391M to gross reserves during the week, closing at USD 46,184M. Net reserves stand at approximately –USD 1,200M under the traditional methodology and –USD 16,500M under the IMF definition.
THE OFFICIAL EXCHANGE RATE CAME UNDER UPWARD PRESSURE. The official rate rose 2.7% on the week, closing at ARS 1,397.21 — 21.2% below the upper band ceiling. Despite steady agricultural liquidations, the recent compression in interest rates, a previously depressed exchange rate, and persistent inflation led market participants to begin unwinding carry trade positions, pushing the dollar higher. Financial exchange rates followed suit: the MEP rose 1.8% to ARS 1,437 and the blue-chip swap advanced 1.2% to ARS 1,495, with the spread widening from 3.0% to 4.0%. FX futures moved in line with the official rate, rising an average of 2.4%, with implied monthly depreciation in the 1.6%–2.0% range and implied rates between 20% and 25% NAR across the curve. On Friday, volume closed at 1,340M contracts and open interest at 4,837M, up 16.7% and 3.7% on the week, respectively.
PESO CURVE RATES EDGED HIGHER. The week brought a mild correction in peso-denominated debt, with rates rising across all segments. LECAPs saw the smallest decline (–0.1%), with rates easing to the 1.7%–2.1% EMR range (from 1.6%–2.0% EMR) across the curve. CER bonds fell 0.6%, with real rates ranging from CER –14%/–10% at the short end (2026) to CER +2%/+8% toward 2027–2028; the market is pricing April inflation at 2.6% m/m, 2.0%–2.1% m/m from May through October, and a full-year 2026 cumulative of 30.5%. Dual bonds fell 0.2%, with spreads over TAMAR around 2%–2.5% and a TAMAR breakeven of approximately 22% NAR, below the current TAMAR of 22.5%. Dollar-linked bonds were the exception, rising 1.7% in line with the uptick in FX pressure; they yield devaluation +3% and imply an exchange rate of ARS 1,452 by June.
SOVEREIGN BONDS CAME UNDER PRESSURE. Hard-dollar sovereigns broke their winning streak, falling 1.4% on the week and underperforming peers, which traded more stable — widening the spread versus the EMBI Latam by 40bps to 294bps. Country risk rose to 557bps despite the BCRA's accelerated FX purchases. In yield terms, Bonares yield 7.45% at the short end and 9.9% at the long end, while Globales yield 6.7% at the short end and 9.5% at the long end. The legislative spread for the 2030 tenor widened again to 1.8% from 0.8% the prior week. BOPREAL also underperformed, falling 1% on the week, yielding 4% at the short end and 8% at the long end. Provincial bonds showed greater resilience, rising 0.2% on the week — with Chubut 2028 the standout (+1.2%), boosted by the province's recent issuance. Corporate bonds were broadly stable (+0.1%), with foreign-law instruments outperforming. Among local-law names, Pampa 2028 (+2.7%) and YPF 2027 (+2.2%) stood out; in foreign law, IRSA 2035 (+0.9%) and TGS 2035 (+0.7%). Local-law bonds average 4.8% yield, versus 7.5% for foreign-law peers.
THE MERVAL DECLINED. Despite higher oil prices and strength in energy stocks, the Merval snapped its recent recovery, falling 1.9% in peso terms and 4.6% in blue-chip swap dollar terms, closing at USD 1,892. Energy was the top sector, with YPF (+4.4%), Aluar (+2.2%), and Pampa (+0.8%) leading gains, while financials concentrated the steepest losses: BBVA (–12.4%), VALO (–11.4%), and Galicia (–10.8%). On Wall Street, Argentine ADRs averaged a decline of 4.3%, with Globant (–15.0%), BBVA (–12.1%), and Galicia (–10.2%) leading to the downside, and VISTA (+8.4%) and YPF (+4.8%) as the main gainers.
WEEK AHEAD:
- This week's agenda will be dominated by Tuesday's auction, in which the Treasury will seek to roll over ARS 7.9 trillion in maturities. The offering includes a short LECAP (S12J6), a TAMAR note maturing in 2028 (TMG28), a CER/TAMAR dual bond due 2029 (TXMJ9), a CER bond maturing in 2028 (TZXS8), and a short dollar-linked instrument (D30S6). Conversion options are also on the table, extending maturities across TAMAR, CER, and dollar-linked instruments, alongside a reopening of foreign-currency placements via AO27 and AO28. In a context of ample liquidity, the Treasury is likely to roll over above 100% again — though with rates having drifted higher last week, it may need to offer some premium over secondary market levels to capture the tenors it is targeting. Beyond the rollover result itself, the market will be watching the composition of demand and any premiums the Treasury must concede in a backdrop of slightly rising rates.
