The Treasury eases up, and the peso market gets some breathing room. The week fell back into place around the peso market, and the balance was positive. Liquidity finished normalizing, the Treasury validated that signal by rolling over below maturities, and rates eased slightly across the curve. The dollar, on the other hand, did move: the official rate and the financial dollars rose in a week marked by the D31G6 fixing, even as the BCRA kept buying and stepped up its pace. Sentiment also improved in equities, with the Merval snapping its losing streak on the back of the financial sector, though the month still closes with a deep correction. The week's only macro data point was supportive: confidence in the Government rebounded after July's drop, with a broad-based improvement across components led by the interior of the country, and remains high in historical perspective, even as the administration's average keeps slipping. The exception was hard-dollar debt, which rebounded only slightly with country risk failing to follow: the mid-week peak again showed that the Argentine spread responds more to external sentiment than to domestic developments. The agenda ahead is light, with August tax collection and the BCRA's REM survey as the main references, and the focus on whether the rate cuts hold without pressuring the exchange rate.

Confidence in the Government rebounds. UTDT released its August Government Confidence Index, which reached 2.06 points, equivalent to 41.2% approval. The index rose 6.4% m/m after July's 6.5% decline, though it remains 2.8% below the year-ago level and 16.5% below the 2025 close. The level is still relatively high in historical terms: in month 32 of the term it stands above Macri, both Cristina Kirchner administrations and Alberto Fernández, trailing only Néstor Kirchner, though the administration's average has slipped to 2.36 points, its lowest on record, versus 2.49 for Macri and 1.88 for Fernández at the same point. The improvement was broad-based, with four of the five components higher and efficiency and concern for the general interest leading the gains, and geographically it was concentrated in the interior of the country, which rose 7.7% to 2.25 points and remains above CABA, which was little changed, and above the GBA, where the index remains the lowest.

The BCRA steps up its purchases. The BCRA bought USD 257M during the week, a pace of USD 51M per day that accelerates from the USD 34M of the prior week, with Thursday and Friday accounting for USD 175M. So far in August purchases total USD 723M, a daily average of USD 38M that deepens the slowdown versus July (USD 103M) and marks the lowest monthly print of the year. Year-to-date purchases total USD 14,060M. Gross reserves, however, closed at USD 49,791M, down USD 869M in the week and back below the USD 50,000M mark. The drop was entirely concentrated on Friday and mainly reflects the decline in the price of gold.

The dollar gains ground. The official exchange rate rose 1.0% on the week to close at $1,513.0, taking its August gain to 1.7%. The rise was concentrated in the first half of the week and touched a high of $1,514.2 on Wednesday, the session in which the A3500 rate used to settle the D31G6 payment was fixed. The financial dollars moved a bit more: the MEP closed at $1,537.5, up 1.2%, and the CCL at $1,601.7, up 1.7%, leaving the MEP-CCL spread at 4.2%. Futures again lagged the spot rate, with the short end up as much as 0.3% and the long end down as much as 0.5%, and implied monthly devaluation stood between 1.5% and 1.7%. Open interest rose USD 211M to USD 4,185M and volume averaged 1,380 thousand contracts per day between Monday and Thursday, with a peak of 2,378 thousand on Wednesday.

The Treasury frees up pesos. Against maturities of around $12.67 trillion, the Treasury received bids for $13.18 trillion and awarded $12.16 trillion, a 95.96% rollover that freed up roughly $0.5 trillion for the market. The menu stayed short and fixed-rate, with Lecaps accounting for 90% (adding the new S29E7 and the T31Y7 maturing May 2027), rounded out by CER (7%) and dollar-linked (3%) instruments, with no TAMAR or dual bonds and an average term of 4.8 months. The choice of short instruments aims to avoid overloading a long end that has been trading at high rates, while not forcing the rollover was meant to support the liquidity normalization, returning some pesos to the market in a limited way so as not to pressure the spot rate. That normalization was already underway, with the BCRA taking in $2.3 trillion in the prior day's repo round and a fixed-rate curve seeing stronger demand. Against that backdrop, cutoff rates came in largely in line with the secondary market, with Lecaps between 2.19% and 2.26% EMR, the Lecer X29E7 at 6.25% EAR, and the dollar-linked D30O6 at 7.64%, in line with what we had anticipated.

Most of the peso curve fell in USD terms. The liquidity normalization filtered through to the curves, but only partly reversed the prior week's damage once translated into dollars. The CER/TAMAR duals, which had been hit hardest, held up best and were the only segment still in positive territory, up roughly 0.3%, ahead of the fixed-rate/TAMAR duals and the Lecaps, both down around 0.5% and now yielding between 2.0% and 2.2% EMR. TAMAR bonds fell about 0.6% and dollar-linked bonds about 1.0%, with the latter still yielding around 6.5% over devaluation. CER bonds moved the least in peso terms but were the worst performer in dollars, down roughly 1.6%, even as the short end compressed from CER+5% to a range of CER+2% to CER+4% while the long end held at CER+10%.

Bonds rebound but country risk doesn't budge. Hard-dollar debt rose 0.6% on average during the week, with Globals (0.9%) outperforming Bonars (0.1%), led by the GD38 (1.9%), GD29 (1.3%) and GD46 (1.2%). Country risk, however, failed to follow: it closed at 512 bps, 7 bps above the prior Friday, after touching 520 bps on Wednesday. The move was again locally driven: the EMBI Latam widened just 1 bp while the Argentine spread added 13 bps. In August, hard-dollar debt is down 3.1% and country risk is up 82 bps from the July close. At these prices, Bonars yield between 4.2% and 10.7% and Globals between 5.6% and 9.4%.

The Merval snaps its losing streak. The Merval rose 1.7% in dollars to close at USD 1,864, snapping the correction of the prior weeks, though it is still down 10.9% in August and 8.3% year-to-date. The rebound was led by the most beaten-down sectors: non-essential consumer (4.8%), construction (4.6%), industrials (3.0%) and financials (2.9%), which had been the worst performer the previous week. Transener led with a 14.8% jump, followed by Agrometal (10.3%), Banco Patagonia (9.2%) and Banco Hipotecario (9.1%). Energy was the exception, down 1.3%, along with real estate (1.0%) and materials (0.4%).

WEEK AHEAD

• This week's macro agenda is light and centers on two data points. On Tuesday, ARCA releases August tax collection, which has been running below inflation, with VAT held up only by the component tied to domestic consumption while taxes linked to financial activity keep declining.
• On Friday, the BCRA releases the REM survey, which will show whether the market revises its inflation and exchange-rate projections for the rest of the year.
• The financial focus will be on whether the rate decompression left by the auction holds without spilling over into the dollar.

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