Argentina markets soar after US Treasury pledges support

By Rodrigo Campos

NEW YORK (Reuters) -Argentine financial assets rallied on Monday, with stocks rising the most in six months, international dollar bonds up more than 6 cents and the peso strengthening after Washington pledged full support for Argentina’s right-wing government ahead of key midterm elections next month.

U.S. Treasury Secretary Scott Bessent said “all options” are on the table for stabilizing Argentina, including swap lines and direct currency purchases, while underscoring President Donald Trump’s confidence in Argentine President Javier Milei and his economic team.

Bessent told reporters after earlier announcing support for Argentina on social media that any U.S. action would be “large and forceful,” but said no steps would be taken until after he and Trump meet with Milei in New York on Tuesday.

Argentine markets have fallen sharply in recent weeks, with international bonds down more than 20% for the year through Friday. The peso has been pressing against the weaker limit of a band set months ago, as corruption allegations inside Milei’s circle and a larger-than-expected loss in a local election in Buenos Aires triggered investor concern over Milei’s ability to reshape the economy.

“Argentina’s assets were in desperate need of a circuit breaker — and they just got one,” said Alejo Czerwonko, CIO for emerging markets in the Americas at UBS. “Bessent’s intervention carries outsized weight at this fragile juncture. It provides the Milei administration with a critical window to reorient ahead of October’s midterms.” 

A favorable political outcome for the government in the October election would go a long way toward containing investor anxiety ignited by the Buenos Aires vote earlier this month, Czerwonko added.

MARKET RALLY IS A REBOUND

An index of Argentine stocks traded in U.S. exchanges rose 14%, and the local benchmark gained 7% Monday after falling more than 15% over the past two weeks.

Earlier, the Argentine government said it would remove export taxes on all grains through next month, aiming to increase sales and boost the supply of dollars to meet demand from institutional investors. That means the tax will be removed past the midterm election on October 26.

“Is this the ‘whatever it takes’ moment for Argentina?” said Armando Armenta, senior economist at AllianceBernstein, alluding to pivotal support from former ECB chief Mario Draghi to the euro experiment back in 2012. “Seems like Milei is getting the support to avoid a financial crisis ahead of the midterm election and ensure a smoother transition into 2026.”

The 2046 sovereign bond was up 8.3 cents at 55.5 cents on the dollar, data from MarketAxess showed. The peso strengthened 4.7% at 1,408.5 per dollar, after the Argentine central bank last week burned through more than $1 billion of reserves to defend it.

Despite the rally in eurobonds, yields were still relatively high, between 16% and 26% across maturities. Investors were still focused on Milei’s willingness to change course, which has been tested both in the streets and by markets.

TEMPORARY RELIEF?

“Depending on the scope and nature, a financial backstop from the U.S., combined with the export tax measures announced this morning, could help Milei more effectively manage within the current FX framework between now and the (midterms),” said Kathryn Exum, co-head of sovereign research at Gramercy Funds Management.

This could reduce the rate at which authorities burn through precious reserves, which at current levels is unsustainable, Exum added.

U.S. potential support to Argentina would likely only offer temporary relief for pressured assets, said Pramol Dhawan, head of emerging market portfolio management at PIMCO. 

“The country doesn’t generate enough dollars at current exchange rates,” he said. “Markets are testing the currency regime’s viability and expect difficult adjustments — particularly currency devaluation — to rebalance the economy.”

He said that the adjustment, alongside continued U.S. and IMF support, “could give the country necessary breathing room for fundamental reforms.”

(Reporting by Rodrigo Campos in New York, additional reporting by Andrea Shalal and David Lawder; editing by Karin Strohecker, Jane Merriman and Rosalba O’Brien)