Argentina eases bond auction rules in aim to lure more dollars

Argentina’s Central Bank unveiled a slew of measures Monday aimed at helping the nation amass more hard-currency reserves, firepower the country needs to defend the peso. 

Officials said local currency bonds can now be purchased with US dollars and that the minimum time requirements for foreign investors to hold onto some Argentine bonds will be eliminated. The monetary authority also said it would unveil a second repurchase agreement with several international lenders, of as much as US$2 billion, on June 11.

The announcements form part of a broader strategy by President Javier Milei to bolster the country’s war-chest of foreign reserves just two months after scoring a multi-billion dollar agreement with the International Monetary Fund.

Dollars have proved elusive for Milei’s predecessors and is cash he needs to defend a historically volatile peso and make bond payments abroad.

As part of its deal with the IMF, Milei’s team committed to raising its net international reserves by US$4.4 billion by June 13. So far, they’ve refused to buy greenbacks via Argentina’s official currency market by offering pesos, in line with its broader objective of avoiding monetary expansion and taming inflation ahead of a key midterm vote in October. 

The Central Bank added that it’ll conduct a buyback of put contracts that gave banks the right to sell Treasury bonds back to the monetary authority, in an continued effort to clean up its balance sheet and tighten control over the money supply. 

Aiding those efforts will also be a phase-out of short-term liquidity notes known as LEFIs, which helped mop up excess pesos in the economy. The government will swap those securities for short-term Treasury bills, known as LECAPs, that trade in the secondary market by mid-July.