Argentina's risk index drops to 417 points, nearing eight-year low

Argentina's risk country index fell to 417 basis points on Thursday, its lowest level since April 2018, as Argentine bonds and stocks extended their rally. Source: Clarín, Infobae

What happened

The JP Morgan risk indicator declined for the fourth consecutive session, hitting 417 points according to Clarín and 421 according to Infobae. Sovereign dollar-denominated bonds rose 0.3%–1%, while the Merval stock index gained 1.8% and Argentine ADRs on Wall Street jumped up to 3.8%. Source: Clarín, Infobae

Drivers of the rally

• Rating upgrades: Fitch and Standard & Poor's raised Argentina's sovereign rating to B-, which removed restrictions for some international investment mandates. Source: Infobae
• IMF program approval: The second review of the IMF program was approved, supporting sentiment. Source: Infobae
• Global tailwinds: A positive global mood and a 13.6% drop in risk country in June contributed. Ignacio Morales of Wise Capital noted a "notable improvement" backed by a favorable international scenario. Source: Clarín

Outlook

Analysts differ on whether the rally can continue. Delphos Investment sees potential for further compression of 130–150 basis points, but also recommends taking profits and rotating into corporate bonds. Source: Infobae Qualy Consultora cautions that Argentina's external debt payments of $17.6 billion remain uncovered, and the yield on sovereign bonds (~9%) still limits access to voluntary markets. Source: Infobae Upcoming payments of $4.2 billion on Bonares may provide a catalyst if reinvested. Source: Infobae