Argentina's country risk fell this Wednesday to 410 basis points, after Moody's Ratings announced the upgrade of the sovereign debt rating from Caa1 to B3. The indicator prepared by JP Morgan lost eight units in the day, bringing the country closer to the 400-point threshold, a level not seen since April 2018, during the government of Mauricio Macri.
The rise in sovereign bonds in the local market and in the United States was the immediate response of investors to Moody's decision. Hard dollar bonds —Bonares and Globales— averaged a 0.2% increase, while the market celebrated the convergence of the three main international rating agencies. Fitch Ratings and Standard & Poor's had already upgraded the rating between May and June, and now Moody's joins at the same level: B3, equivalent to the B- of the other two agencies.
Puente's Research team highlighted that Moody's not only aligns with the other rating agencies, but also assigned a positive outlook, unlike Fitch and S&P which maintain a stable one. Moody's said that the probabilities of default had fallen substantially, and that the upgrade reflects the macroeconomic stabilization that the Government is carrying out and the improvement in the external front.
Jaime Reusche, vice president of Moody's Ratings, said that the rating upgrade will probably bring more investments to the country and significantly lower the cost of financing, both for the Government and for companies, banks, the public sector and even individuals. The executive stated that the positive outlook opens the door to future improvements if structural reforms continue to consolidate.
For Tobias Sanchez, portfolio manager at Cocos Capital, Moody's move was not a surprise, but it marks a turning point. When the three point in the same direction, the signal ceases to be an isolated piece of data and becomes a trend. The relevant thing is not the letter itself, but what it confirms: that Argentina has ceased to be the country on the brink of default and is beginning to show an improvement with more solid foundations. The analyst also highlighted that the anchor remains fiscal order, but the change is in the external front, driven by energy, mining and reserve accumulation.
Emilio Botto, head of Strategy and Investments at Mills Capital, warned that the second half of the year will be more demanding in seasonal terms, with the end of the main harvest and the maturity of debt payments. However, he stressed that the dynamics of reserve accumulation —which has already exceeded the annual target of USD 10,000 million— was key to compressing the country risk from 600 points in January to the 400 zone.
Although the market celebrates the "three out of three" of the rating agencies, analysts call for prudence. Argentina remains in risky debt and far from investment grade. The decisive test, they warn, will be political from here to 2027, when the continuity of the economic course will be defined. For now, each step the country climbs expands the universe of international funds that can position themselves in Argentine assets.
