Pimco, Barings question how soon Argentina can sell bonds again

Argentina’s Economy Minister Luis Caputo told investors during a presentation in JPMorgan Chase & Co’s New York offices last month that the government expects to sell bonds abroad again by January 2026. 

To asset managers at Pacific Investment Management Co and Barings, that’s a long shot.

The serial defaulter, they say, needs to clear significant hurdles before it can even entertain the idea of a return to the market. Among those are a deal with the International Monetary Fund that includes fresh cash, a steep slowdown in inflation and a sustainable, balanced budget. For now, interest rates are far too high to consider a sale.

“It’s impossible to make that projection with yields close to 20 percent,” Yacov Arnopolin, senior emerging-markets portfolio manager at Pimco, said in an interview. “We’ve seen very few cases of countries accessing capital markets with yields north of 10 percent. They would need to deliver everything: fiscal, inflation, IMF deal.” 

Investors demand about 1,204 basis points of extra yield to hold Argentine sovereign bonds over comparable US Treasuries, according to a JPMorgan index that’s a common indicator for country risk. That gauge, while at its lowest level since April, remains far above its regional peers. 

“A lot will need to happen between now and then,” said Ricardo Adrogue, head of global sovereign debt and currencies at Barings, referring to a return to capital markets in 2026. “But there are things that can be done and the core of it is the government continuing to meet the zero deficit goal.”

One of the first things President Javier Milei needs to do is secure a sizeable loan from the IMF, to which Argentina already owes US$44 billion. The Washington-based lender is currently reviewing whether Argentine officials are compliant with their end-of-September fiscal and reserve targets, a spokesperson said on Thursday.

Building a buffer of foreign reserves is necessary for the country to lift capital controls, something that Milei had said he would abolish, but has so far refused to do — and which Baring’s Adrogue says he should continue to do.

“We are in full disagreement with most of the market participants or the commentary that says, ‘if there is a removal of capital controls, that is the signal that the market needs for money to come in,’” he said. “No, that is the signal for money to get out. It has always been.”

As Milei’s shock therapy ripples through the economy, the rally in Argentina’s hard-currency debt has stalled after a whopping 58 percent jump that’s sent the bonds to all-time highs, according to pricing data compiled by Bloomberg. Pimco’s Arnopolin sees a much harder path for the notes from now on. 

“The next leg of the rally is going to be harder,” he said. “Now it’s about execution, the grind of data on current account, growth, inflation – and what the Milei administration can accomplish politically. People want more proof, and more proof requires time.”