Argentina inks $1b repo agreement with global lenders
Argentina’s government has secured a $1 billion repurchase agreement (repo) with five international banks, marking a key milestone for President Javier Milei as he works to stabilise the nation’s fragile economy. The two-year, four-month deal, announced by the country’s central bank on Friday, will help replenish foreign reserves and ease short-term financial pressures.
Though the banks involved were not officially disclosed, sources confirmed the participation of Citigroup Inc., JPMorgan Chase & Co., Banco Bilbao Vizcaya Argentaria SA, Banco Santander SA, and Industrial and Commercial Bank of China Ltd.
Argentina’s sovereign bonds reacted positively to the announcement, with benchmark notes due in 2035 reaching session highs before settling at 68.6 cents on the dollar. “The stars are aligning for Argentina,” said Aaron Gifford, an emerging markets sovereign analyst at T. Rowe Price. “…, I think there’s probably a bit more room to go.”
The central bank noted that it received offers for $2.85 billion, ultimately settling on terms that include a spread of 4.75 per cent above the secure overnight financing rate. The new funds are expected to support bond payments, with $4.7 billion in capital and interest obligations due this month.
President Milei, who took office over a year ago, has prioritised fiscal austerity and monetary reforms, managing to keep the peso relatively stable and inflation under control. Despite lingering challenges like high poverty and inflation exceeding 100 per cent, Milei’s policies have bolstered investor confidence. Argentina’s sovereign risk score has improved significantly, dropping to 606 basis points from over 1,000 in late October.
The repo deal coincides with ongoing negotiations for a new programme with the International Monetary Fund (IMF), which could extend beyond the current $44 billion agreement. Milei and Economy Minister Luis Caputo aim to finalise the deal within the first four months of 2025, potentially unlocking fresh funding.
Market optimism reflects a broader belief in Milei’s ability to navigate Argentina’s economic hurdles. “They’re essentially back to market access, they’ve already secured the funds to pay down near-term maturities, and a new IMF program is in the making,” Gifford added.
Attribution: Bloomberg
