Country risk in Argentina falls to its lowest level since 2018

Country risk in Argentina fell to 415 basis points, reaching its lowest level since April 2018. The index prepared by JP Morgan ended the day with a drop of 6 points, falling below the 420 basis point threshold for the first time in over eight years. While markets closely monitor the positive impact of this development on Argentina's external financing options, dollar-denominated sovereign bonds in the country and Argentine ADRs on Wall Street also benefited from this positive atmosphere.

The recovery in bond markets was a continuation of the rise that began in June, particularly gaining favor in long-term bonds. The appreciation of dollar-denominated instruments such as Bonar 2041 and Global 2046 was interpreted as a sign of increased confidence among international investors. The downward trend in country risk also brought a rise in shares of Argentine companies trading on Argentina's own stock market, the Merval, as well as on US stock exchanges, not on Borsa İstanbul.

Market participants now have their eyes fixed on the 400 basis point level; this limit stands out as a critical reference point that has not been breached since April 2018. Experts note that if the index tests the 402, 401, and 400-point thresholds, a psychological threshold will have been crossed as well. In the longer term, below the 350 points seen in early 2018 and even the record of 184.74 basis points in 2007, the lowest level of the century, are among the distant targets that could come to the agenda.

Technically, the country risk indicator prices a country's credit risk by measuring the interest rate difference between US Treasury bonds and the sovereign bonds of emerging market countries. The current level of 415 basis points indicates that Argentina's borrowing cost is approximately 4.15% higher compared to the USA. Although this data does not directly determine the financing cost of companies or states, it serves as the most important barometer of the capacity to borrow from international capital markets under favorable conditions.

While the Argentine government currently meets its financing needs with loans obtained from multilateral organizations, it aims to sustain this decline in country risk. Permanently reducing risk is accepted as a strategic priority for the country to return to voluntary borrowing markets on more advantageous terms. On the other hand, strong increases in the shares and ADRs of leading companies such as Loma Negra, Grupo Supervielle, and Grupo Financiero Galcia show that the optimism in the economy is also reflected in company values.