Argentina markets soar after US Treasury pledges support

By Rodrigo Campos

NEW YORK (Reuters) -Argentine financial assets rallied on Monday, with U.S.-traded stocks up over 10%, international dollar bonds up more than 6 cents and the peso strengthening after Washington said "all options are on the table" for the U.S. to support Argentina's government.

U.S. Treasury Secretary Scott Bessent said swap lines, direct currency purchases, and purchases of U.S. dollar-denominated government debt could be used in support of Argentina, which he labelled a "systemically important U.S. ally in Latin America."

Bessent said any U.S. action to help stabilize Argentina's currency would be "large and forceful," and that Washington would not impose any new conditions or demands on such steps.

He said that Argentine President Javier Milei and U.S. President Donald Trump would meet on Tuesday, and details of the support would be available after the meeting.

ARGENTINA TO REMOVE EXPORT TAXES ON ALL GRAINS

Earlier, the Argentine government said it would remove export taxes on all grains through next month, aiming to boost sales and the supply of dollars to meet demand from institutional investors. The dates mean the tax will be removed past a key midterm election on October 26.

Argentine markets have fallen sharply over the past weeks, with international bonds down more than 20% for the year through Friday. The peso has been pressing against the weaker limit of a band set months ago, as corruption allegations inside President Javier Milei's circle and a larger-than-expected loss in a local election in Buenos Aires triggered investor concern over Milei's ability to reshape the economy.

"Argentina’s assets were in desperate need of a circuit breaker — and they just got one," said Alejo Czerwonko, CIO for emerging markets in the Americas at UBS. "Bessent’s intervention carries outsized weight at this fragile juncture. It provides the Milei administration with a critical window to reorient ahead of October’s midterms." 

A favorable political outcome for the government in the October election would go a long way toward containing the investor anxiety ignited by the Province of Buenos Aires vote earlier this month, Czerwonko added.

An index of Argentine stocks traded in U.S. exchanges rose 13% and the local benchmark gained 6% Monday after falling more than 15% in two weeks.

The 2046 sovereign bond was up 8.5 cents at 66 cents on the dollar, data from MarketAxess showed. The peso strengthened 2.7% at 1,436 per dollar, after the Argentine central bank last week burned through more than $1 billion of reserves to defend it.

Despite the rally in eurobonds, yields were still relatively high between 16% and 26% across maturities. Investors were still focused on Milei's willingness to change course, which has been tested both in the streets and by markets.

U.S. SUPPORT LIKELY TO PROVIDE ONLY TEMPORARY RELIEF

“Depending on the scope and nature, a financial backstop from the U.S., combined with the export tax measures announced this morning, could help Milei more effectively manage within the current FX framework between now and the (midterms)," said Kathryn Exum, co-head of sovereign research at Gramercy Funds Management.

This could reduce the rate at which authorities burn through precious reserves, which at current levels is unsustainable, Exum added.

U.S. potential support to Argentina would likely only offer temporary relief for pressured assets, Pramol Dhawan, head of emerging market portfolio management at PIMCO, said. 

"The country doesn't generate enough dollars at current exchange rates," he said. "Markets are testing the currency regime's viability and expect difficult adjustments — particularly currency devaluation — to rebalance the economy."

He said that the adjustment, alongside continued U.S. and IMF support, "could give the country necessary breathing room for fundamental reforms."

(Reporting by Rodrigo Campos in New York, additional reporting by Andrea Shalal and David Lawder; editing by Karin Strohecker, Sharon Singleton and Jane Merriman)