PURCHASES HELD AND SPREADS COMPRESSED, as the week combined a favorable global backdrop with positive signals on the domestic front. The IMF disbursement following approval of the second program review, coupled with the BCRA's strong pace of reserve purchases, delivered a visible boost to gross reserves. Hard-dollar sovereign debt led the gains, with country risk breaking below 500 bps and the Merval posting its best week in months, driven by banks and energy. Peso debt also rallied: CER instruments led the advance, Lecaps compressed again even as the Treasury secured a comfortable rollover and absorbed pesos from the system. The official exchange rate closed higher and futures tracked the move. On the negative side, the Government Confidence Index extended its losing streak to six consecutive months, with the administration's average hitting its lowest level since the start of the term. Looking ahead, the market will watch May tax revenue and any developments on the multilateral financing front, with an eye on whether the global environment sustains its positive tone.

GOVERNMENT CONFIDENCE EXTENDED ITS DECLINE, with the UTDT Government Confidence Index (GCI) falling 1.6% m/m in May and posting an 18.7% y/y drop. This extends the losing streak to six consecutive months, accumulating a 19.2% contraction since December. The administration's average fell to its lowest since the start of the term. Among components, Capacity dropped 5.6% and hit a record low for the administration; Honesty and General Interest also declined. Efficiency and Overall Assessment showed marginal recoveries. By segment, the sharpest declines were concentrated among women (-13.0% m/m) and the 30-to-49 age group (-11.3%); men and those over 50 recorded gains. Geographically, the Interior maintains the highest confidence levels while Greater Buenos Aires remains the most lagging segment. At 30 months into the administration, the current level sits just below where the Macri administration stood at the same point in its term.

THE BCRA POSTED A SECOND CONSECUTIVE RECORD WEEK OF PURCHASES, accumulating USD 761M in net purchases over the four trading days, averaging USD 190M/day and surpassing the prior week's pace (USD 183M/day). Agricultural liquidation remained stable, suggesting the acceleration was driven primarily by exports from other sectors and corporate bond settlements. This brought the monthly cumulative to USD 2,601M over 19 trading days — USD 137M/day — in line with April's average (USD 138M/day). Year-to-date, the BCRA has accumulated USD 9,756M in net purchases. Gross reserves rose USD 1,385M to close at USD 48,191M, largely explained by a USD 1,000M IMF disbursement following approval of the second program review.

THE OFFICIAL EXCHANGE RATE CLOSED HIGHER IN MAY, rising 1.2% on the week to $1,410.29, accumulating a 1.1% gain in May and sitting 24.6% below the band ceiling ($1,757.34). The MEP rose 0.6% to $1,434.56, while the CCL fell 0.2% to $1,484.44, with the swap spread holding at 3.5%. Near-term futures tracked the official rate, with June-through-September contracts rising between 0.7% and 1.1%, while contracts from January 2027 onward fell between 0.2% and 0.5%. Implied monthly devaluation holds in the 1.9%–2.0% range for contracts through October, with implied NAR rates of 25%–27%. Volume closed at 1,478M contracts and open interest at 4,406M, up 5.9% from the prior week's close.

THE TREASURY MAINTAINED AN ELEVATED ROLLOVER, renewing 114% of maturities at Wednesday's auction (May 27) and absorbing $1.58 trillion in net financing. The breakdown was dominated by fixed-rate instruments — 43% in September Lecap (S15S6) — with strong demand for the Tamar 2028 (31%); dollar-linked gained share (11%) and CER instruments accounted for the remaining 15%. No CER/Tamar dual bonds were offered. Cutoff rates: the Lecap cleared in line with secondary (1.99% EMR); CER and Tamar came slightly above secondary (TZXM7 at CER+2.0% vs. CER+1.7%, TZXS7 at CER+5.1% vs. CER+4.8%, Tamar TMG28 at 7.93% vs. 7.87%). Dollar-linked required a premium: D31L6 cleared at Dev+6.01% against a secondary range of 3.7%–4.6%, and D31M7 at Dev+5.5% against 3.8%. In USD, the AO27 placed USD 200M at a 5.12% yield, completing its USD 2,000M cap; the AO28 placed USD 150M at 8.49%, also at its ceiling. Average maturity fell to 387 days from 574 at the prior auction, though the Treasury continues to extend maturities by tapping peso liquidity and low rates at the medium end of the CER curve. May closed with an average maturity of 473 days and a 24.4% NAR, slightly below April's 537 days and 24.8%. Year-to-date, the Treasury has rolled over 111% of maturities and absorbed $9.96 trillion in net financing.

CER BONDS LED THE WEEK, with peso debt posting broad gains amid the backdrop of the Treasury auction. CER instruments topped both weekly and monthly rankings, rising 0.9% on the week and accumulating 3.6% since the start of May, with real yields ranging from CER –7%/–2% in the 2026 segment to CER +2%/+5% into 2027 and CER +7%/+8% in 2028. Implied May inflation eased to 2.1% m/m from 2.3% the prior week; the market prices in an average of 1.7% m/m from June through October and 1.5% m/m on average through April 2027, with 2026 accumulated inflation at 28.8%. Dollar-linked bonds rose 0.9% on the week but remain the weakest monthly performer (+1.7%), yielding devaluation +4%, with an implied exchange rate of $1,429 for June (1.3% m/m devaluation) and $1,511 for September (1.7% m/m). Lecaps rose 0.8% and have accumulated 2.7% over the period, with rates compressing again at the short end to around 1.8% EMR while the long end held at 2.0% EMR. The compression continued despite the Treasury absorbing $1.58 trillion at Wednesday's auction, reflecting the system's ample peso liquidity. Dual bonds posted the smallest gain of the week (+0.4%), accumulating 2.2% in the month, and yield a margin of between –1% and +0.6% over the Tamar rate.

COUNTRY RISK BROKE BELOW 500 BPS, as hard-dollar sovereign debt gained an average of 0.8% on the week, supported by a favorable international backdrop — with U.S. sovereign yields declining — and the BCRA's substantial reserve purchases. The monthly advance now stands at 2.2%. Bonds performed in line with regional peers, which rose 1.0% on the week. Country risk closed at 494 bps, compressing 20 bps on the week. Globals led within the sovereign curve, averaging 1.0%, with the GD41 the standout at +1.6%. At current prices, Bonares yield between 7.3% and 9.6%, while Globals offer 5.6%–9.2%. The legislative spread between the GD30 and AL30 held around 1.8%, while the GD35–AL35 differential stood at 3.5%. BOPREALs outperformed sovereigns, rising 2.1% on the week and accumulating a 1.3% monthly gain. BOPREAL Series 3 led with a 2.7% advance ahead of its Friday maturity. Curve yields range from 4.8% to 7.6%. Sub-sovereign bonds gained 0.5% on the week, driven mainly by Buenos Aires 2037 (+0.5%); in the month, sub-sovereigns were the top hard-dollar performers, accumulating 2.4%. The provincial curve ranges from 6.2% to 11.5%. Corporates advanced 0.1% on the week but fell 0.1% in the month. NY Law instruments led (+0.3%) while Local Law bonds fell 0.3%, with YPF 2029 the top gainer at +0.6%. NY Law bonds yield 7.4% on average vs. 4.9% for Local Law.

THE MERVAL EXTENDED ITS RALLY, rising 11.2% on the week in pesos and 11.4% in dollar terms, closing at USD 2,133 and handily outperforming Brazil (-1.2%) and Latam (+0.1%). The index closed May up 12.1% in dollars, turning positive for the year at +6.5%. All sectors advanced, though the impulse was concentrated mainly in banks and energy, despite lower international crude prices. Top performers were Supervielle (+22.6%), Macro (+22.0%), and BBVA (+19.1%), while VALO (-3.0%) was the sole decliner. ADRs listed on Wall Street rose an average of 9.6%, with Telecom (+22.8%), Supervielle (+22.7%), and BBVA (+19.9%) leading, while Adecoagro (-5.7%) and Vista (-1.6%) declined.

WEEK AHEAD

• The week's macro agenda features May tax revenue. The series has been deteriorating in real terms, with tax receipts failing to keep pace with nominal spending growth, keeping the adjusted fiscal surplus under pressure.
• In markets, attention will remain on the BCRA's pace of purchases — which closes May at a sustained level — and on any developments surrounding guaranteed multilateral financing, whose resolution could provide further impulse to sovereign debt, provided the global backdrop continues to cooperate.