Argentine provinces tap global markets that sovereign avoids

Argentine provinces are tapping global bond markets at the fastest pace in nearly a decade, even as the federal government sticks to short-term debt in the local market amid investor fears over the 2027 elections.

Chubut, Cordoba and other provinces, along with Buenos Aires City, have issued a combined US$2.3 billion in bonds in the first five months of 2026. That is the most for that period since 2017, according to data compiled by Bloomberg. Buenos Aires secured the lowest borrowing cost in its history – 7.4 percent – after eliciting about US$3 billion in orders for a US$500-million 10-year bond sale this month.

President Javier Milei has eased currency controls, slashed fiscal spending and tamed rampant inflation, making him a favourite among investors and the US administration. But sustained economic growth remains elusive for now, stoking concerns about next year’s presidential election. With the government refraining from issuing debt abroad at yields of about nine percent, investors are turning to provincial and corporate bonds as alternative ways to profit from Argentina’s recovery.

“If you need to be invested in Argentina during the 2027 election cycle, borrowers such as Buenos Aires City are the place to hide from volatility,” said David Austerweil, deputy Portfolio Manager at VanEck, which owns Buenos Aires City and Santa Fe debt. “Provincial credits are on average better quality borrowers.”

Córdoba and Chubut tapped markets to refinance debt and extend maturities, issuing US$800 million and US$650 million at yields of 8.95 percent and 9.45 percent, respectively. Entre Ríos also placed US$300 million at a 9.6-percent yield, returning to global markets for the first time in nearly a decade. Santa Fe, one of the country’s largest provinces, raised US$800 million in December at an 8.4-percent yield.

Safer bet

Gorky Urquieta, co-head of emerging-market debt at Neuberger Berman, said a number of provincial bonds rank higher in quality than the sovereign itself. He pointed to Chubut, which backed its US$650-million deal with oil royalty revenues. 

“It’s trading a little inside the sovereign, but has a significant collateral component,” Urquieta said. “We’ve seen that in downturns, provincial debt tends to do better.”

Provinces are still far from insulated from Argentina’s broader vulnerabilities though. Most ultimately depend on access to dollars from the Central Bank to service foreign-currency debt, meaning a deterioration in reserves or a renewed sovereign crisis would likely reverberate across credits. Provincial debt also has a history of restructuring during periods of sovereign stress, from Argentina’s 2001 economic collapse to the 2020 debt crisis, when Buenos Aires province restructured almost all its US$7.1 billion of defaulted debt.

But, the current rush into provincial bonds reflects a broader hunt for yield across emerging markets as spreads globally remain near multi-year lows.

Many of the Argentine deals have seen strong demand from local investors familiar with the provinces, while also enticing buyers with higher yields than other Argentine corporate bonds, according to Adrian Guzzoni, head of debt capital markets for Latin America at Citigroup Inc. Argentine companies have raised more than US$10 billion abroad since Milei’s strong showing in the October 2025 midterm elections sparked a rally across local assets. 

The Argentine government, by contrast, has relied on local funding and repo loans, cashing in on a glut of dollars in the local market. That debt is largely short-term, helping investors avoid exposure to the 2027 election risk.

The gap between local sovereign dollar bonds maturing before and after the election – currently yielding roughly 5.1 percent and 8.6 percent, respectively – is a clear measure of those election concerns. While Milei saw his approval rating rise in a survey published Thursday, his popularity remains near the lowest levels of his term.

Stretched valuations

Jacopo Turolla, Senior Portfolio Manager at Azimut Investments, part of Azimut Group, said the sovereign looks stretched at current levels, making provinces a more compelling entry point for investors who want Argentine exposure without paying top dollar for it.

“The sovereign is a bit too expensive at these levels,” he said. “I do share the optimism of many investors – this is the most positive and stable backdrop Argentina has had in years. Still, it’s a market where it usually makes more sense to add exposure during periods of volatility.”

Turolla said he participated in the Chubut deal, which came at a yield of 9.45 percent for a 10-year bond. 

“Even in a scenario involving political volatility or a sharp devaluation, investors have some degree of additional protection – which is something we are keen on,” he said. “Argentine provinces have shown resilience even at times when the sovereign was in distress.“