Xavier Milei’s economic reform programme has delivered some impressive macro results, such as the first primary fiscal surplus in almost two decades, with Banco Itau forecasting GDP growth of 3.5% in 2026, supported by an improving investment outlook. On 6 May Fitch lifted the country’s credit rating to B- form CCC, the first rating agency to do so.
The country’s 10 year bonds look relatively cheap compared with other govies in the same rating bracket, creating a potential relative value trade for investors.
“A full move out of the CCC to the B bucket would be a very material support of bonds given it enables all funds with restrictions around CCC ratings to buy,” wrote Simon Weaver, analyst at Morgan Stanley. “Ecuador a few months ago offered a very supportive preview, with the impact on Argentina potentially even larger given it is a larger share of indices. Notably, Argentina is not yet priced as a B- credit. 5Y CDS markets price it as a CCC- credit, 1.5 notches lower pre the upgrade today, while bonds price it 1.7 notches lower. On our own valuation framework, we think weighted average yields should be closer to our bull case of 9% compared to today’s yields of 9.7%.”
The upgrade followed a glowing review of the country’s economic performance by the International Monetary Fund (IMF) in August 2025.
“The rollout of the new monetary and exchange rate framework – alongside the easing of most foreign exchange restrictions – was executed flawlessly,” wrote Leonardo Madcur executive director at the IMF and Adrian Nador, senior advisor to the board at the World Bank.
They noted that the peso’s transition to a flexible, broad band exchange rate regime went well with no market disruption.
“The elimination of central bank remunerated liabilities was also crucial in anchoring expectations. Going forward, the authorities have reaffirmed their commitment to the monetary framework anchored around strict control of the monetary supply, with interest rates determined by the markets,” they added.
Yet Banco Itau notes that the country, whose history of defaulting on debt has made it an outlier in government bond markets, still faces headwinds.
“The persistent acceleration in inflation represents a key downside risk, potentially delaying the recovery in real wages and warranting a more cautious view on the pace of the consumption rebound,” wrote Banco Itau analysts, Diego Ciongo and Soledad Castagna, in March 2026. ”In addition, leading investment indicators, including imports of capital goods, have yet to signal a near‑term recovery, suggesting that the investment upturn may materialise more gradually than initially expected.”
Certain factors have contributed to lower sovereign spreads. Argentina successfully issued peso-denominated sovereign bonds in late May and early June 2025, marking its return to international capital markets for the first time since 2018. Political stability improved significantly after Milei’s party secured a decisive victory in the October 2025 midterm elections, and S&P upgraded Argentina’s local currency sovereign credit rating to CCC+/C in December 2025.
There are several reasons why the market has not fully compressed spreads to where fundamentals might suggest, allowing the bonds to look cheap.
Milei’s approval rating fell to 35.5% in April from 44% in January, while disapproval climbed to 63% according to pollster AtlasIntel. Credit default swaps imply a 22% three-year default probability and almost 60% over ten years, showing caution amongst investors.
While some investors remain bullish, the tension between bulls and bears create a relative value opportunity for bond investors, if they can access Argentinian debt effectively.
For investors who believe Milei’s midterm win locks in the reform path for long enough, the spread over comparably-rated EM peers looks excessive, hence the “cheap” framing. The key variables to watch are the IMF review disbursement, reserve accumulation, and whether Milei’s approval stabilises ahead of the 2027 presidential cycle.
“At this point, we thus maintain Argentina as one of our key like stances across EM, with ARGENT 2038 being our favoured bond across the curve,” writes Weaver.
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