Argentine peso to get boost from post-election debt sales rush

Argentine provinces and companies are lining up to tap global markets in the next few weeks as President Javier Milei’s win in midterm elections fuels optimism about the country, opening a window for debt sales that could bring much needed dollars into the nation’s foreign-exchange market.

The bond rush kicked off this week, led by oil firms YPF and Tecpetrol. The former mandated banks for investor meetings to reopen its dollar notes due 2031, while the latter was in the market Wednesday selling dollar debt. All the information comes from people familiar with the offerings, who asked not to be named because the information isn’t public. 

The deals are only the start of what investors say is a broader pipeline of debt sales ahead. Sunday’s vote provided traders with much-needed reassurances that Argentina’s economic reform agenda remains on track, with Milei more than doubling his party’s representation in Congress and switching his tone to a more conciliatory one. The country’s risk premium, measured by five-year credit default swaps, slumped by nearly 600 basis points after the result, while dollar bonds soared. 

The expected flurry of issuance also comes amid widespread optimism with risky assets. Emerging-market investors are getting even more bullish on junk bonds, demanding the smallest premium in more than five years to shift from investment-grade to high-yield debt in a hunt for yield.

Banks are advising issuers – from companies to provinces – to seek at least US$500 million on their offerings, the people said. Energy distribution company Transportadora de Gas del Sur, also know as TGS, is preparing a new issuance of around US$500 million, according to people familiar with the matter. Pan American Energy, one of the country’s largest crude exporters, and oil and gas driller CGC are also considering selling dollar bonds, one of the people said.

Buenos Aires City is meeting with banks this week to structure a plan to sell as much as US$600 million in debt abroad, while Santa Fe Province  is weighing a separate transaction of as much as US$800 million, according to the people, with about US$500 million in new money and using the remainder for a buyback or an exchange offer. These deals were under consideration in early September, but the rise of political risk after Milei’s poor showing in a local election forced issuers to delay plans.

Another potential issuer is Chubut Province , where documentation has long been ready and officials see a conducive window, though a final decision hasn’t been made, one of the people said.

In the case of provinces, bond sales need approval from the national government. Under central bank rules, issuers must sell the dollars they raise in the foreign-exchange market. 

Pan American Energy and TGS declined to comment, while CGC didn’t immediately respond to a request for information. Authorities in Buenos Aires City, Santa Fe and Chubut also didn’t reply. 

Badly needed dollars

Fresh dollar inflows from corporate bond sales should bring some stability to the nation’s battered peso in the short term, said Santiago Resico, an economist at local brokerage firm one618. The currency continues to be under intense volatility, surging Monday only to reverse a good chunk of that bounce the following session, nearing the limit of its trading band again before rebounding on Wednesday. Argentina agreed to uphold the managed float scheme as part of its latest deal with the International Monetary Fund, but traders see it as unsustainable in the long run. 

“With inflation running at two percent, and the bands at one percent, you’re going to continue appreciating the real exchange rate, which will create problems again,” Resico said. 

The timing is also crucial for the government. Farm-export receipts – the country’s main source of hard currency – have faded after an incentive pulled forward sales into September, leaving the market short of dollars. Fresh cash from Argentine companies and provinces would help plug that gap. 

Analysts say that dollar supply could also rise in coming days as companies and households unwind positions they built in anticipation of a poor showing by the government in Sunday’s election, which didn’t materialize. 

“New issue activity was very limited before the election as country risk spiked,” said Cristian Fera, an analyst at KNG Securities. “Now, after the result and the confidence boost, everyone wants to jump in.”