The Argentine government had to pay a steep price — 29.5% — in its first international debt issuance under President Javier Milei. Nevertheless, it successfully placed the $1 billion Bonte 2030 bond (a dollar-denominated debt security that pays in pesos), with demand exceeding supply.
This marks the first issuance of local currency bonds under Argentine law targeted at foreign investors in seven years. The offering saw strong demand, with bids totaling $1.694 billion from 146 investors.
The Market Had Expected a Yield Around 22%
The issuance met the goal set by Argentine authorities: to increase reserves without intervening in the exchange rate, which currently fluctuates within two bands. However, the Bonte 2030 came at a high cost: while the market had anticipated a yield of around 22%, the final rate was significantly higher.
“In Argentina, if you go back to what happened in 2017 and 2018, the government at the time (Mauricio Macri’s administration) issued around $4 billion in bonds similar to the Bonte, and the holders of those bonds who kept them to maturity lost all their capital due to a nearly 100% devaluation of the peso. So it makes sense that investors would demand a premium, especially since this is the first significant issuance in the market, in local currency, and with a long duration,” explained Juan Salerno, partner and head of investments for Argentina at Vinci Compass.
Banco Mariva offered a similar analysis: “The 29.5% yield at which the bond was issued exceeded market expectations and may initially seem excessive. However, there are various interpretations: the yield includes an initial risk premium the government must pay to reestablish market access. Another perspective (supported by the government) is that the 29.5% rate aligns with both the dollar yield curve (around 12%) and the CER curve (real yields of around 10%).”
Paula Bujía from Buda Partners explained that “demand was oriented toward real yields closer to 10%, far above the 5% that some local traders considered reasonable and in line with current CER (inflation-adjusted) bond yields. The inclusion of a two-year early redemption (‘put’) clause also serves to reduce risk. Additionally, the perception that the official exchange rate is overvalued is not a minor factor: had the peso been closer to the upper band (1300–1400), the required yield might have been lower.”
Analysts from Adcap Grupo Financiero noted that the rate was identical to that of a one-year peso Treasury bill (Lecap): “As in other auctions, the government offered a premium, though in this case it was significant. The cut-off rate was set at a nominal 29.5% (31.7% effective annual), virtually identical to the one-year Lecap rate.”
A Positive Issuance to Boost Reserves
A recent report by Cohen Aliados Financieros noted that under the terms of the IMF agreement from April, the BCRA (Central Bank of Argentina) is required to bring its net reserves to –$2.746 billion by June of this year and reach a positive balance by the end of 2025.
In this context, Juan Salerno of Vinci Compass explained that this issuance is positive given the government’s goal of meeting its reserve targets with the IMF, because “local currency bonds are counted at 100% toward net reserves, and this bond is subscribed in dollars, which means the dollars go directly into reserves. The broader context is that the government doesn’t want to buy dollars within the floating bands, so the only way to meet the reserve target is to turn to external borrowing.”
Analysts point to another positive aspect: it opens the door to similar future issuances. The identities of the 146 entities that purchased the Bonte 2030 are not public, but the market believes they are international risk funds.
Salerno noted that, internationally, Vinci Compass currently holds no peso-denominated Argentine bonds but does hold dollar-denominated ones — both sovereign and corporate, including some provincial issues. Locally, the firm does participate in the peso market.
“The Bonte issuance is a first step because there are still capital controls in Argentina (exceptions were made in this case), and we still need greater predictability. We believe it will be successful because this rate will attract many investors. Now, it’s important to watch how the secondary market behaves; I also believe it will be successful if the government maintains its goal of controlling inflation,” said the Vinci Compass expert.
Paula Bujía of Buda Partners also offered an encouraging note: “Looking on the bright side, and recalling the BOTES issued in 2016 — which debuted with high yields but then compressed significantly as macroeconomic conditions improved — this new placement could meet a similar fate. If Argentina continues to normalize its economy and starts accumulating reserves, the Bonte 2030 could follow a similar path of spread compression and pave the way for less onerous issuances for the government. But it’s important to note that issuing debt is not enough: reserves must also be accumulated to satisfy the market.”
For Amaya Uriarte
For Guadalupe Barriviera