By Jorge Otaola
BUENOS AIRES (Reuters) -Argentina’s country risk index, an important reflection of how investors view the country’s public debt, closed on Tuesday slightly below the previous day’s close, after a steep fall earlier in the day surprised officials and analysts.
The closely watched J.P. Morgan risk benchmark, which shows the yield spread on Argentine sovereign government bonds versus comparable U.S. debt, closed at 561 points, after plummeting earlier to 444, its lowest level since 2018.
While Argentina’s government shoulders massive liabilities, markets have recently cheered cooling inflation and early signs of an economic rebound following years of a deep economic slump.
According to traders, the index reading was adjusted due to technical issues that had caused the steep slide and were related to key bond payments expected later this week.
Argentina is set on Thursday to pay off $4.3 billion in principal and interest on its “Bonares” and “Globales” bonds.
Earlier on Tuesday, Felipe Nunez, an economist at Argentina’s Treasury, wrote on social media that the index showed “a mismatch in the price due to coupon payments and amortization of the bonds.”
The country risk index has been falling due to rising optimism in Argentine financial markets, and broke the 600-point threshold on Monday.
Argentina’s falling country risk reflects optimism in the country’s financial markets under President Javier Milei, who took office in late 2023 and has implemented a cost-cutting economic program targeting sky-high inflation and government spending.
Nicolas Merino, from trading group ABC Mercados de Cambio, credited the country risk’s reduction in part to Argentina’s trade balance, which notched its 12th-consecutive monthly surplus in November.
Merino also credited the country’s recovering foreign reserves, expectations of a new debt agreement with the International Monetary Fund, and a recent $1-billion repurchase agreement loan with five foreign banks.
(By Jorge Otaola and Hernan Nessi in Buenos Aires; Writing by Brendan O’Boyle; Editing by Kylie Madry, Matthew Lewis and Rod Nickel)
