Only in Argentina: companies are financed cheaper than the US Government.

The most visible of these situations is the sudden rush by local companies to lock in interest rates on dollar-denominated bonds that are below what US Treasury bonds pay, according to the news agency Bloomberg.

He Supervielle Bank, For example, in May it placed US$20 million in one-year local negotiable obligations with a rate of 3.25%, below the yield of comparable US Treasury bonds, which is around 4%. The oil company YPF issued US$ 122 million in a security maturing in 2030 in the local market last month a rate of 5.5%. This month the Government raised US$500 million through dollar bonds in the local market: the one-year securities, maturing in 2027, were sold with a yield of 5%, just above comparable US Treasury bonds.

Argentina, according to Bloomberg, “it is flooded with dollars” in the midst of a jump in rural exports and capital controls that continue to keep those dollars largely trapped within the country. International companies cannot buy dollars for savings purposes or freely repatriate dividends before 2025.

The abundance of local liquidity in dollars pushed down financing costs in the domestic market, which allows the Government to sell debt at lower yields at home, instead of going out to seek financing abroadand helps finance debt payments due this year.

Low borrowing costs are a raritynot a sign that investors consider Argentine companies to be less risky than the United States Government.

Operators who buy these bonds also have to consider the exchange rate depreciation expectations and losses associated with inflationwhich remains among the highest in the world, at 32.4%.

In global markets, Argentina still faces high financing costswhich has kept the Government away from external investors. But the situation shows to what extent the economy remains distorted.

“The exchange controls left “captive dollars seeking yield”said Juan Pedro Mazza, senior institutional sales trader of the Cohen Stock Exchange company. I think so “an opportunity for companies and the Government to borrow locally at cheaper levels.”

Dollar corporate bonds under local law yielded an average of 4.8% for all maturities as of May 15, compared with about 7.4% for similar debt under foreign law, according to secondary market data compiled by Cohen.

Corporate placements are small compared to the amounts issued in global markets, and short durationwhich shows that the local market can only absorb to a certain extent. Furthermore, those same companies continue to pay significantly higher rates on larger, longer-term foreign law bonds sold abroad. YPF paid 8.1% to attract international investors in a bond issue for US$ 550 million at the beginning of this year.

The persistence of low rates shows that there is still excess dollar liquidity in the local market, Mazza said. The agricultural exports, income from energy sector and a wave of corporate debt issues abroad boosted foreign exchange earnings, while retail deposits in dollars rose to highs of two decades under the Milei government.

The temporary excess of liquidity in dollars is unusual for a country that has defaulted on its debt nine times, and helped sustain the peso as one of the best-performing currencies during the war in the Middle East, he says Bloomberg.

“Banks are full of dollar deposits and with little demand for dollar loans,” he said. Alejandro Butti, CEO of Santander Argentina, at a recent event in Buenos Aires. “Local rates in dollars are extremely low compared to international markets, and some export pre-financing lines in Argentina are being agreed close to the rates at which the United States Government borrows.”

With some $4.5 billion in foreign-currency bonds maturing in July, local financing became a centerpiece of Milei’s debt strategy, rather than issuing debt abroad with high-single-digit yields.

The government first placed nearly $1 billion in dollar bonds under local law in December to help cover about $4.5 billion in debt payments due in early 2026. Facing another major maturity in July, the Treasury expanded that scheme and began issuing short dollar bills every two weeks, aimed at retail investors. The securities mature in 2027 and 2028 and pay monthly interest, rather than the more common semiannual coupons.

“As long as we have access to financing around 6% to repay debt that yields around 9.5%, that’s what makes sense,” Economy Minister Luis Caputo said this month. “When that option is no longer available, that’s where we will eventually go to market.”