We maintain our Neutral recommendation on Argentina sovereign USD-denominated bonds, with the ARGENT 2035s as our preferred curve expression and the 2038s emerging as a compelling shorter-duration alternative. The 2041s offer a lower dollar-price entry, while we favor the 2030s for defensive duration exposure and would switch out of the 2046s into the 2041s. Spreads have widened by approximately 230–290 bps across the curve since our June initiation, restoring substantial carry and spread compensation without a comparable deterioration in fiscal discipline, disinflation or reserve accumulation. Greater policy-reversal risk and tighter financing conditions, however, prevent us from moving to a broad Overweight.
The repricing has materially changed valuations. The ARGENT 2035s trade at 739 bps OAS, 11.80% YTW and $68.9, compared with 491 bps, 8.9% and $79.7 at our June initiation. The 2041s trade at 716 bps OAS, 11.81% YTW and $63.8, versus 483 bps, 8.9% and $74.5 in June. The 2035s now trade 144 bps above their three-month average OAS and 126 bps above their one-year average, a substantial reversal from the tight valuations that constrained our initial recommendation. Argentina is not alone in facing higher borrowing costs, but its underperformance has been pronounced. The EM Corporate USD single-B index has widened approximately 79 bps since our initiation, compared with 248 bps for the ARGENT 2035s. The additional 169 bps of widening highlights how substantially investors have reassessed Argentina’s financing and policy risks despite continued macroeconomic stabilization.
