EM Credit Weekly: Carry through the noise

Research evidence excerpt

EM Credit Weekly: Carry through the noise

ning without extra time. We remain Overweight Argentina. The

macro backdrop continues to improve, with June CPI rising just 1.9% m/m, below

market expectations of around 2.0% and down from 2.1% in May, reinforcing the

ongoing disinflation process and supporting the government's stabilization

strategy. Export performance also remains robust, providing a steady source of

hard-currency inflows, while the BCRA has continued purchasing dollars in the FX

market, accumulating close to US$12bn year-to-date. This has allowed the

authorities to meet the IMF's reserve accumulation target well ahead of schedule,

providing an important vote of confidence in the policy framework. The

combination of lower inflation, fiscal discipline and stronger reserve dynamics

continues to reduce near-term macroeconomic risks.

That said, the external financing story is not fully resolved. While reserve

accumulation has exceeded expectations this year, Argentina still faces sizeable

external financing needs in 2027. The Treasury's recently published financing plan

assumes these obligations can largely be met without tapping international bond

markets, relying instead on approximately US$4bn of collateralized financing,

continued domestic dollar bond issuance, reserve accumulation and the

refinancing of BCRA liabilities such as BOPREAL and repos. We view this

framework as broadly credible, particularly given the government's demonstrated

fiscal discipline and improving reserve position, but its success ultimately depends

on continued domestic dollarization, solid export growth and the authorities'

ability to continue rebuilding reserves while servicing Treasury obligations. In our