Argentina’s Economy Ministry announced on Friday the issuance of a local-law bond denominated in U.S. dollars, aimed at addressing the debt maturities scheduled for January. The newly issued bond, designated as BONAR 2029N, is set to be tendered on December 10, with a maturity date in 2029 and a semiannual coupon rate of 6.5%. The ultimate yield remains to be ascertained. The action comes in the wake of a succession of effective debt issuances by corporations and regional administrations. The government of Buenos Aires province is pursuing similar objectives; however, Economy Minister Luis Caputo suggested that the Milei administration may not permit this initiative. Argentina’s upcoming bond issuance marks the first occasion since 2018 that the country will offer debt denominated in U.S. dollars. “After almost eight years of lacking access to the medium- and long-term dollar financing market, the federal government is once again placing a foreign currency bond,” stated the economy ministry. The ministry further noted that the Central Bank has acquired more U.S. dollars than “any other administration,” yet it has been unable to augment its reserves as these funds were allocated to debt repayment. Argentina is confronted with nearly US$4.2 billion in debt maturities in January, and the government has not amassed sufficient dollars to meet this obligation. According to the methodology employed by the International Monetary Fund, the nation’s net international reserves are presently recorded at negative US$16 billion, reflecting a decline since Javier Milei assumed office.
Caputo stated that the bond will partially address the principal maturities on two bonds, the AL29 and AL30, which total US$1.2 billion. The remaining portion will be funded via bank loans and additional sources that have yet to be revealed. The research team indicates that this “relatively generous” coupon enhances the appeal of the instrument compared to the current bonds. The restructuring of the bonds was executed by former Economy Minister Martín Guzmán, who held office from 2019 to 2022 during the presidency of Alberto Fernández. “Hard currency sovereign bonds are posting a slight rebound, suggesting a positive impact on the market from the news,” Adcap stated. They cautioned, however, that the rebound “is not at all comparable” to what was seen in September/October following the announcement of the US Treasury’s support. “There is much speculation surrounding the size of the new issue,” they stated, adding that the government “will opt for a sizeable placement.” Conversely, Pablo Repetto indicated that if the focus is solely on covering the principal maturities of the bonds, they might be seeking a “small amount of money.” There may be an increase in demand, as it is likely that institutional investors such as banks and insurance companies have preemptively consented to participate. “I believe they could secure US$2 or US$3 billion if they chose to,” he stated.
Governor Axel Kicillof is also seeking to secure credit, yet he may face a more protracted journey ahead. After two weeks of rigorous negotiations between Peronism and the opposition, the Buenos Aires province Legislature approved a bill on Thursday that allows the province to incur debt exceeding US$3 billion. Following the session, Kicillof stated in a post on X that the province would manage to fulfill debt maturities incurred by former Governor María Eugenia Vidal without “compromising resources for health, education, security, public works, and other needs.” Kicillof criticized Milei, asserting that the law was enacted contrary to “the explicit wishes” of the president. He charged the libertarian economist with wagering “on chaos, disorder, and the collapse of the province to gain political advantage.” The ongoing conflict between the two parties is not merely a matter of rhetoric; it possesses the potential to significantly influence the financial landscape of the province. On Friday, Economy Minister Luis Caputo expressed uncertainty regarding the federal government’s willingness to permit Buenos Aires province to proceed. “There is a law, the fiscal responsibility law that dates back to 2004, whereby provinces commit to not taking on debt as long as current expenditures exceed inflation. Buenos Aires is not complying with this rule,” he stated. “From a technical standpoint, the new debt issued today ought not to require approval.”
In the wake of Milei’s triumph in the midterms and the subsequent decline in the country risk index, various provinces have successfully issued their own bonds. Santa Fe province issued debt to international investors amounting to US$800 million this week, featuring a nine-year maturity and an annual interest rate of 8.1%. The province announced that it had received offers amounting to US$1.8 billion. Following the legislative elections on October 26, Santa Fe became the second district to secure financing in dollars. Recently, Buenos Aires City issued US$600 million at a 7.8% interest rate.