Argentina’s bonds rally as country seeks US$2.7 billion repo line

Argentina’s bond prices rose on reports that the government is negotiating a credit line to meet its principal debt obligations next January.

The country is in talks with several banks to obtain a so-called repo line of around US$2.7 billion for about three years, according to a person familiar with the negotiation.

Banco Santander SA and JPMorgan Chase & Co are most involved in talks that are being carried out by Argentina’s Central Bank, according to another person with direct knowledge. Both requested anonymity to discuss the private negotiations. It’s unclear how much money Argentina would receive from each bank or what collateral the government is offering in the deal.

Santander didn’t immediately reply to requests for comment. JPMorgan declined to comment. 

The economy ministry also announced on Wednesday that the Inter-American Development Bank and World Bank are providing a total of US$8.8 billion in financing for social programmes and the private sector in Argentina over the next few years.  

Argentina’s sovereign bonds led gains in emerging markets following the news, with notes due 2030 and 2029 climbing more than 1.3 cent each on Thursday morning. 

“Confirmation of access to international funding is an important confidence boost as bondholders look to identify the source of dollars needed to make debt service payments in 2025 and beyond,” said Graham Stock, senior sovereign strategist with RBC Bluebay.

President Javier Milei’s economic team, which is in Washington this week attending the International Monetary Fund and World Bank Group’s annual meetings, has started to telegraph the country’s vision for what a new program with the IMF could look like. Formal negotiations with the Fund have yet to begin, one of the people said. 

Argentina’s US$44-billion programme, negotiated by Milei’s predecessor, is the largest ever provided by the Washington-based lender — and its 22nd with the crisis-prone country. Argentina has sought an additional injection of reserves by the IMF that would help Milei remove capital and currency controls and return to international capital markets.

A wide gap still remains between Fund staff and Milei’s economic visions. The Fund has repeatedly asked for positive interest rates, more flexible currency policy and rebuilding of foreign reserves that are seen as the weakest part of Milei’s economic programme. Tensions peaked in September when the IMF pulled Rodrigo Valdés, its top negotiator, from the programme after Milei railed against him as “truly irresponsible” for greenlighting the previous government’s policies.

On Wednesday afternoon before a group of investors, Caputo said Argentina was considering all options to lift capital controls, even in the absence of a new programme with the Fund, according to people with direct knowledge.

The economy minister expects inflation to converge to the peso’s two-percent monthly devaluation rate, known as the crawling peg, which Milei has previously said could trigger a slowdown of the crawl to one percent a month.

The libertarian also noted recently that once he lifts capital controls, he’ll opt for a “flexible” exchange rate, without providing more details.