Javier Milei’s Black Swan Win Makes Argentine Bonds Plunge

The country’s dollar-denominated sovereign bonds were dropping by more than 7% this Tuesday

Photo: Maria Amasanti/Bloomberg
August 14, 2023 | 11:02 AM

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Buenos Aires — Javier Milei and La Libertad Avanza’s black swan win in Argentina’s primaries this Sunday, August 13, have positioned the Libertarian as a main candidate for the general elections in October, and that is triggering an initially negative impact on markets.

Milei proposes radical reforms for the Argentine economy, including a full dollarization and shutting down Argentina’s central bank (BCRA).

Investors, traders and brokers had anticipated a victory for “Juntos por el Cambio”, cofounded by former President Mauricio Macri in 2015. The opposition alliance mustered only 28.27% of the vote, down from close to 43% in the 2021 midterm elections.

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During the first hours of trading on Wall Street, Argentine dollar-denominated bonds were posting drops of more than 6%. These are the price movements for bonds issued under foreign jurisdiction at 4:10pm, Buenos Aires time:

  • The Global 2029 (GD29): -7.46%
  • The GD30 (main benchmark): -7.30%
  • GD35: -6.43%
  • GD38: : -6.44%
  • GD41: -7.46%
  • GD46: -7.36%

Among the Argentine-law bonds, Bolsas y Mercados Argentinos (ByMA) informed even more pronounced drops:

  • AL29D -9.85%
  • AL30D: -7.33%
  • AL35D: -8.28%
  • AE38D: -4.25%
  • AL41D: -3.79%

A Black Swan Event

“Yesterday’s events are a black swan,” 1816, an economic and financial consultancy, wrote this morning to its clients. “It was not anyone’s baseline scenario and obliges a recalculation of investments,” they added.

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Meanwhile, the PxQ consultancy, directed by Emmanuel Álvarez Ágis (former deputy Economy Minister during the Cristina Kirchner administration), wrote in a report: “Dollarization today, in its most basic version, is an impossible proposal without some type of default, since the BCRA has negative net reserves worth -US$ 8,098. Negative net reserves mean that the monetary authority’s short-term debt (maturing next year) exceeds its own reserves by that value. Therefore, if the BCRA were to use reserves on the asset side to dollarize, it would imply defaulting on some of its short-term liabilities, the largest of which is the Swap with the People’s Republic of China.”


Analysts at Aurum Valores considered that in the primaries, “the scenario that generated the most uncertainty” has occurred, and therefore, the worst for Argentine assets.

“The division of votes into three thirds will hinder the possibility of thinking about static scenarios. The situation will be very volatile based on the candidates’ statements and the actions the government takes to try to improve its performance in October,” they wrote.