Argentina’s government announced Friday that it will issue a four-year, dollar-denominated bond, marking its return to the international debt market.
“We are returning to the capital markets,” celebrated President Javier Milei said in a post on X.
The dollar-denominated BONAR 2029N bond will carry a 6.5 percent interest rate and is the first such issuance since 2018, Economy Minister Luis Caputo said in a television interview.
Argentina is currently negotiating with banks for a roughly US$7-billion loan, and faces more than US$4 billion in debt maturities in January.
“It is extremely important,” Caputo told the A24 news channel, noting that the move will help facilitate the accumulation of reserves, a requirement set by the International Monetary Fund (IMF) under its loan to the country.
“It has been difficult to build up reserves because, while most countries typically roll over their debt, Argentina has had to pay it since it has no access to credit,” the minister added.
According to a statement from the Economy Ministry, the proceeds from the auction will be used to partially cover a payment Argentina must meet on January 9. The new bond is scheduled to mature in November 2029.
The final size of the issuance will depend on market conditions and the interest rate demanded, although the minister said there was “strong demand” for the instrument after several rounds of talks with agents.
Milei celebrated the announcement on social media, posting: “VAAAAAAAAMOOOOOO TOTO...!!! We’ve returned to the capital markets with a 2029 bond at a 6.5 percent coupon under local law. The greatest [minister] of all time!!!”
Building reserves
Argentina’s last debt issuance on international markets was in “January 2018,” Caputo noted.
The new bond, to be auctioned on December 10, will pay interest every six months and return the full principal at maturity, the Finance Secretariat said.
Subscription and payment will take place in dollars under local legislation.
In its official statement, the Economy Ministry said that in a context of “sharp compression in dollar bond yields driven by the election result and the solid performance of the economic programme”, the Treasury aims to broaden its financial strategy to cover upcoming dollar-denominated maturities without reducing the Central Bank’s net reserves.
Caputo said that by raising funds to refinance principal repayments, with interest to be paid using the fiscal surplus, both the Treasury and the Central Bank will be able to retain the dollars they buy from now on.
“This is not new debt. It is to repay old debt. By refinancing it, every dollar the Central Bank buys can now be kept as a reserve. This settles the debate over accumulation,” Caputo said.
“The idea is to cover the January payment without touching reserves,” he stressed.
“Argentina has not issued [a bond] since January 2018. The bonds will be governed by local legislation,” Caputo added.
Argentina signed a new US$20-billion agreement with the IMF in April, which requires, among other commitments, meeting targets for international reserve accumulation – the Milei government’s Achilles heel.
Caputo argued that the new issuance will improve Argentina’s financial outlook and help reduce the country risk rating, tracked by JP Morgan & Chase, which remains above 600 basis points.
“Country risk has fallen a lot, but it could fall further,” he said.
– TIMES/AFP/NA
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