Cash-strapped Argentina makes key $4 billion debt repayment

Argentina, battling to rebuild depleted foreign currency reserves, sent a major signal to markets on Thursday with an over $4 billion bond repayment, a milestone as libertarian President Javier Milei seeks to woo back creditors.

Milei’s government, whose pledge to balance the books with a tough austerity agenda has turbo-charged asset markets but pushed up poverty, had promised to pay some $4.36 billion to settle interest and principal on its Global and BONAR bonds.

“They say a promise is a debt... In this case, it’s PAID!” Argentine Finance Secretary Pablo Quirno wrote on social media platform X on Thursday.

Some analysts fretted the payment would further strain the central bank’s foreign reserves, which fell $1.73 billion on Wednesday to $31.18 billion. Net reserves of freely-available funds are estimated to be in the red.

Others pointed out a significant portion of the repaid funds might be reinvested in the country’s sovereign debt due to its high yield and an increasingly attractive country risk rating.

“In terms of dollar-denominated sovereign bonds, now that January’s coupons and principal payments are being made, we believe part of that cash flow could be reinvested in the same bonds, further reducing the country risk spread,” said Juan Manuel Franco, chief economist at Grupo SBS.

The country’s financial markets have been buoyant due to Milei’s tough “zero deficit” policies, cooling inflation and the government’s commitment to meet its debt obligations. The risk premium on Argentina’s bonds has slid sharply in recent months.

On Wednesday, Moody’s raised the ceiling on Argentina’s credit rating for local and foreign currency, citing increased predictability and consistency in economic policy.

The central bank recently announced a $1 billion repurchase agreement with international banks to bolster its reserves. The government is also negotiating with the IMF for new funds on top of a current $44 billion loan.

Chicago soybeans dip on stronger dollar, easing Argentina concerns. Chicago soybean futures slipped on Thursday, pressured by a stronger U.S. dollar and easing concerns over dryness in key exporter Argentina, while investors looked for more clarity on U.S. President-elect Donald Trump’s tariff plans.

Corn rose as traders repositioned ahead of a U.S. Department of Agriculture crop report on Friday.

The most-active soybean contract on the Chicago Board of Trade (CBOT) was down 0.7% at $9.8 a bushel as of 1155 GMT, while corn was up 0.1% to $4.54-1/2 a bushel.

The market will close early on Thursday to honour the passing of former U.S. President Jimmy Carter.

The U.S. dollar charged ahead on rising bond yields, following a report that Trump was considering the use of emergency measures to allow for a new tariff programme.

A stronger dollar makes U.S. grains more expensive for buyers holding other currencies, thus less competitive overseas.

The country’s financial markets have been buoyant due to Milei’s tough “zero deficit” policies, cooling inflation and the government’s commitment to meet its debt obligations. The risk premium on Argentina’s bonds has slid sharply in recent months.

On Wednesday, Moody’s raised the ceiling on Argentina’s credit rating for local and foreign currency, citing increased predictability and consistency in economic policy.

Traders were awaiting the U.S. crop data for supply and demand insights.

Agricultural consultant Andrew Whitelaw of Episode 3 in Canberra noted that while the USDA report could prompt some market repositioning, “a tight, range-bound market” was expected.

Market players were also monitoring weather developments in key South American growing regions, with rain forecasts for Argentina in mid-January dispelling dryness worries.

In Brazil, dry weather is limiting soybean development in the southernmost state, while heavy rains may disrupt early harvests in central regions, according to meteorologists.

Despite this, Brazil is anticipating a bumper soybean harvest. StoneX forecast Brazil’s soybean production to reach 171.4 million metric tons in 2024/25, a 14.4% increase from the previous season.

“Argentina is dry, but unless major problems emerge in Brazil, the total South American crop is expected to be enough to keep global supplies elevated,” Bergman Grains Research said in a note. The most-active wheat contract fell 0.3% to $5.34-1/2 a bushel.

Purchases from South Korean feedmakers lent support to the market, even as cheaper supplies from Argentina and the Black Sea region weighed on prices. (Reporting by Ella Cao, Mei Mei Chu and Sybille de La Hamaide. Editing by Subhranshu Sahu and Mark Potter)