Argentina’s US$150-million bond sale prices risk after Milei’s term

Argentina sold US$150 million of a bond denominated in dollars on Friday that gauged investors appetite to finance the government beyond President Javier Milei’s first term.

Officials placed the local-law bond maturing in October 2028 at a yield of 8.9 percent, according to an Economy Ministry statement. The bond has a maximum authorised size of US$2 billion, though it will be issued gradually in weekly tranches of up to US$250 million.

Investors closely watched the transaction, albeit modest in size, as a barometer of political risk stretching beyond Milei’s current administration, which ends in December 2027. Another government security known as the Bonar 2027 – a similar instrument with a shorter maturity – trades closer to a 5.1 percent yield. 

Economy Minister Luis Caputo took to social media to point out the difference between the two yields broadly reflecting the premium investors demand to hold debt that extends beyond the next electoral cycle. Caputo, who shelved a plan to return to international markets earlier this year, says Argentina’s sovereign risk, around 580 basis points, should be about half that level. 

Although investors have broadly welcomed Milei’s fiscal tightening – reflected in sharply lower sovereign spreads since last year’s midterms – uncertainty over the durability of those policies under a future administration continues to weigh on Argentina’s borrowing costs. 

“This placement effectively allows the market to price so-called reversal risk,” Gustavo Araujo, head of Research at local broker Criteria, wrote in a note ahead of the sale. “For sovereign debt investors, the key question is how sustainable current policies are over time and the likelihood that a future administration could shift course in a way that alters asset valuations.”