Buenos Aires
Pressure built on Argentina’s currency and stocks on Monday after a far-right libertarian who wants to axe the central bank and dollarize the economy unexpectedly won a primary election.
Congressman Javier Milei shook up the race towards presidential elections in October by far outperforming forecasts to win some 30% of the vote, the largest share with over 90% of ballots counted.
Markets were betting on a strong performance by more moderate candidates, who had a bad night, in a ballot that acts as a dress rehearsal for the national election in two months’ time.
The outcome could weaken the peso currency in popular parallel markets on Monday and weigh on bonds, which have risen in recent weeks. Argentine stocks were meanwhile marked lower, with the Global X MSCI Argentina ETF down 4.3% in U.S. premarket trading. The country’s sovereign dollar bonds fell as much as 4 cents on the dollar, with the 2029 note leading the slide.
The 2041 bond was trading at 29.75 cents on the dollar, and the 2046 was at 28.35 cents on the dollar at 1246 GMT.
Investment bank JPMorgan projected mounting pressure on the exchange rate, resulting in a widening gap between the parallel and official exchange rate, according to a note led by analyst Diego Pereira. The official exchange rate stands at 287 pesos per dollar, while the free-floating rate is more than double that amount.
The U.S. bank recommended staying market weight on Argentina’s government bonds as the existing financial landscape is set to deteriorate further.
