Argentina is hesitating to sell dollar debt in the local market due to a rise in borrowing costs, complicating its efforts to fulfilll billions in debt payments next year. The government has refrained from issuing a Bonar dollar bond domestically for two months, marking its longest hiatus since the program’s inception in February, coinciding with a rise in yields exceeding 500 basis points to over 12 percent. Simultaneously, escalating borrowing costs in international markets have extinguished any remaining aspirations for a debut bond issuance overseas. That pause could incur significant expenses. The government had planned to sell nearly another US$1 billion in the local market this year, followed by an additional US$5 billion in 2027. Economy Minister Luis Caputo stated on Wednesday that the government maintains its expectation to issue local bonds next year; however, it may resort to a currency swap with China should it encounter difficulties in doing so. “When authorities had the chance to smooth next year’s financing schedule, they chose not to, arguing that all-in yields were too high,” said Armando Armenta. “Now, that decision implies the 2027 election season will be bumpy.” Argentina is confronted with approximately US$25 billion in hard-currency debt obligations in the upcoming year, which is part of a more substantial maturity timeline extending through 2030.
The government had outlined a plan to meet those obligations without relying on global bond markets, instead banking on Central Bank dollar purchases, privatisations, multilateral financing and local issuance. It is that final pillar of support that is currently showing signs of deterioration. As Argentina’s economic growth stagnates, inflation persists at elevated levels and anxieties regarding unemployment escalate, apprehension surrounding President Javier Milei’s potential electoral defeat next year – which could abruptly terminate his pro-market policies – is expected to intensify. Local investors are currently making a clear differentiation between debt that matures prior to and subsequent to the October 2027 vote. The yield gap between local dollar bonds on either side of the election has expanded to nearly 500 basis points, as per data. Caputo attempted to alleviate apprehensions on Wednesday following discussions with investors during the International Monetary Fund and World Bank meetings in Bangkok, emphasising Argentina’s US$19-billion swap line with China’s central bank. That includes approximately US$5 billion available for debt repayment – roughly aligning with the amount the government intends to raise through local law dollar bonds in the upcoming year. While prior administrations have utilised a portion of it to fulfilll debt obligations to multilateral lenders like the IMF and to service bondholders, the swap does not serve as a direct substitute for dollar bonds.
It supplies yuan to Argentina’s Central Bank instead of dollars directly to the Treasury, and the conditions regulating its utilisation remain largely undisclosed. The challenging financing environment is bringing renewed attention to the opportunities that the government overlooked earlier this year. Argentina initiated an international bond sale in early 2026, appointing Alejandro Lew as finance secretary to lead the initiative. Milei ultimately decided against issuing due to the associated costs, leading to Lew’s resignation. Another window opened around June after rating upgrades pushed sovereign spreads toward 400 basis points, their lowest in about eight years, and all-in yields below nine percent. Caputo again opted to delay, preferring the more economical financing options accessible in other venues, including the local dollar market. It is now beyond the appropriate timeframe. “It probably would have been a good idea for Argentina to issue internationally back then, and strengthen its reserves,” said Ramiro Blazquez. “Now it looks more complicated because I don’t see spreads falling meaningfully before the election.” The government asserts that it has been consolidating resources to safeguard the peso in anticipation of the upcoming elections.
Milei estimates the arsenal to be approximately US$75 billion, which encompasses Central Bank dollar purchases and US$20 billion each in swap lines with the United States and China. It is also relying on supplementary funding from financial institutions and multilateral lenders. “We know that next year we have presidential elections,” Milei said this month in Paris. “That’s why we’ve spent this entire year getting ahead of it and preparing a bazooka of dollars.” Argentina has intensified its initiatives to accumulate dollars, recently revealing the privatisation of the water utility AySA, while the Central Bank has expedited its acquisitions of greenbacks this month. Argentina continues to attract debt investors, as double-digit bond yields entice buyers who maintain confidence in Milei’s economic reforms. “It’s still a good story – the sell-off for me is more of an entry point to increase relative to developed market bonds,” said Lamine Bougueroua, one of the largest holders of Argentine debt. “They still need to raise some dollars – but at this point, I think they will be able to do that.”
