Bonds rise and country risk falls below 1,400 points after Milei’s speech

Markets reacted positively after the president presented the 2025 Budget Javier Milei last night before Congress. The ratification of that Zero deficit will be the axis of management in the next year caused Argentine bonds to rally, along with stocks.

Bonds rise around 1% and the country risk, the JP Morgan indicator that measures the excess cost of Argentine debt, breaks through the 1,400 basis point floor and at the start of the day it gives way at 1,379 points, the lowest level since June.

The blue dollar is quoted $ 1.265while financial institutions have slight declines, in a continuation of the “currency summer” that has dominated the market since August. The MEP falls 0.2%, $ 1.217, and the cash with liquidity yields 0.4%, to $ 1.239.

Stocks also started higher, with a 1.5% rebound in the Merval. Also on Wall Street, ADRs are increasing: BBVA with 4.3%, Supervielle with 4% and Telecom with 3.6%.

One of the advisors to the Ministry of Economy, Federico Furiase, who is also the director of the Central Bank, posted a photo of the bonds trading in green on the social network X. “It is historic to have a President who defends a Budget where the level of public spending is endogenous to the objective of fiscal financial balance. If resources were to rise above what was projected, These savings will be used to lower taxes, pay off debt and/or absorb pesos“.

Milei’s presentation seems to have lived up to market expectations, which had already been showing positive data since last week.

The 2025 Budget contemplates an annual inflation of 18.3% and an expansion of the Gross Domestic Product (GDP) of 5.0%. It also foresees that the official exchange rate would follow the same pace as prices, with an advance of 18.3% in the year and thus would close at $1,207 per dollar, after ending 2024 at $1,020always according to the official projection.

One of the central data for the market is that a balance in the financial result is expected of public accounts and a primary surplus of 1.3% of GDP by 2025.

Following these announcements, bonds have been rising in line with last week’s trend. This has allowed country risk to reach its lowest level in 100 days. On June 2, it had touched 1,302 points.

From that moment on, The country risk had climbed to 1,625 points on August 5This occurred amid heightened tension in the markets, as the government became bogged down in internal disputes and escalated tensions with the opposition and moved forward with the approval of the law to increase pensions, which was ultimately vetoed by President Milei.

The drop in country risk had been strengthened last week, when Congress could not insist on raising pensions and the veto was ratified. For bondholdersthe rise in pensions complicated the possibilities of maintaining the surplus and put pressure on the resources needed to pay the debt.

Even with this drop, the country risk is still far from the 1,174 basis points it reached on April 22, in what was the lowest level of the Milei era.

“After a week of rally, the Globales start the morning with momentum (up to 1.2% in the premarket). Specifically, during the week they rose between 3.3% and 5% which brought their weighted average price above the US$ 50. Thus, it reaches the maximums that we observed in April. Unlike the dynamics we saw at the beginning of the week, the rise ended without discriminating sections: the shorter titles increased 3.3/4.1% and the longer ones 4/5%,” they point out from Portfolio Personal Inversiones (PPI).