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Argentina markets on tenterhooks as news of US support is announced

The peso of Argentina weakened slightly on Monday, while the stock market edged upwards and bond prices rose. This was in anticipation of the news that the U.S. Treasury would be providing financial assistance to Argentina. Political tensions are also increasing in Argentina ahead of the midterm elections scheduled for later this month.

The price of international dollar bonds increased between 0.7 cents and 2.5 cents across all maturities. This continues the volatile trend that has been seen in the last few weeks. However, they are still far below the historic highs reached in January, which were revisited late in June.

Traders said that the average price of sovereign bonds on the local market increased by 1.2%. This was due to portfolio restructuring, which occurred in response to speculative purchases. The interbank peso dropped 0.35%, to 1,429.5 dollars per unit. Meanwhile, the S&P Merval index rose 0.3%.

According to his office the Economy Minister Luis Caputo was in Washington for a few days to negotiate a multimillion dollar currency swap with U.S. Treasury Sec. Scott Bessent to boost investor confidence.

It is not clear if he met Bessent, or officials of the International Monetary Fund. Donald Trump, the U.S. president, will meet Milei in Washington on October 14 during the same week as the World Bank and IMF convene.

Roberto Geretto, an economist at AdCap in Buenos Aires, said that the market was waiting for more information than just signals. More details about the loan program or loan are needed to ease tensions and ensure the financial program no matter the outcome of the elections. The leading candidate for Milei’s party on the midterms ballot in the Buenos Aires Province resigned Sunday after being scrutinized for his ties with a businessman who is under investigation for drug trafficking in the U.S.

Milei's popularity has fallen in recent weeks amid a scandal involving his sister, a confidante of his, and an angry public that is tired of austerity measures by the government.

In another setback last week, Argentina's opposition-controlled Senate voted to override Milei's vetoes of bills boosting funding for public universities and pediatric healthcare.

(source: Reuters)