Argentina risk index breaks below 1,000-point barrier as markets cheer

By Walter Bianchi

BUENOS AIRES (Reuters) – Argentina’s closely-watched country risk index, a reflection of how investors view the country’s debt, broke below a key level of 1,000 basis points on Friday, the lowest in at least four years as markets cheer libertarian President Javier Milei.

The J.P. Morgan risk benchmark, which shows the yield spread on bonds versus comparable U.S. debt, dropped around 53 points to 984, while sovereign bonds were up around 1%, extending a major rally since Milei took over in December.

The new government has dramatically cut state spending, overturning a deep fiscal deficit, focused on rebuilding depleted foreign reserves, turned off the taps of new money supply and managed to temper triple-digit inflation.

That’s gone down well with investors, despite a deep recession and rising poverty rates. Bonds and equities have been on a tear so far this year, while the long-embattled peso currency has strengthened in widely-used parallel markets.

“Investors are starting to feel dizzy,” said local brokerage Portfolio Personal Inversiones in a recent note, citing a “vertiginous rally” of the local S&P Merval stock index, which rose 1.4% to an all-time intraday high on Friday.

“The Merval seems to have no ceiling,” it said.

Analysts pointed to positive recent developments in terms of credit from multinational lenders and conversations with banks, which should help Argentina cover its debt obligations, along with signs economic growth may be starting to recover.

(Reporting by Walter Bianchi; Editing by Aida Pelaez-Fernandez and Adam Jourdan)