Argentina is selling domestic dollar debt on Wednesday for the first time since its 2020 restructuring, marking an important step for Javier Milei’s government as it plans a return to global bond markets next year.
Economy Minister Luis Caputo told an investor event Tuesday that he hopes to raise at least $1 billion through a sovereign bond maturing in 2029 at a lower interest rate of 9%, compared to the 10.4% yield at which an existing 2029 bond trades in secondary markets.
Selling the bond under local law, to be purchased primarily by local investors, would be a big step toward Milei’s goal of returning Argentina to international capital markets, five years after its ninth sovereign debt default left it locked out.
It would also signal a dramatic turnaround in investor confidence, just two months after market turmoil – triggered by fears over the future of Milei’s economic reform program – forced Argentina to seek a $20 billion US bailout before midterm elections in October.
An unexpected landslide victory for Milei’s party in those elections eased a crisis of confidence in his government, causing yields on the country’s international debt to plummet from about 12% above comparable U.S. Treasuries in early October to about 6.4% currently. Yields move inversely to prices.
“Wednesday’s selloff is a very positive step,” said Graham Stock, senior sovereign strategist at asset manager RBC BlueBay. “I would expect a steady progression from this initial domestic issuance, via a partially guaranteed external issue or debt swap, to a direct issuance as spreads tighten further.”
Caputo said the money raised would be used to pay off about $4 billion in obligations Argentina faces in January. The government is currently negotiating a buyback agreement with international banks to cover the remainder of the payments.
The government is looking for “strong local demand, encouraged by regulatory changes making it easier for insurers to participate, in the hope of pushing yields below 9%,” said Thierry Larose, portfolio manager at fund company Vontobel.
While he does not expect foreign investors to buy the bonds, given the higher yields that already exist on some debts, local investors have an “additional incentive” to buy the bonds due to the difference between onshore and offshore peso exchange rates.
This means that “investors can sell government bonds held abroad, repatriate dollars and buy new bonds domestically,” Mr. Larose said.
The government views the sale under the local law as “a good minimum viable product” to raise interest on Argentina’s debt ahead of a likely offering under the New York law in early 2026, said Nery Persichini, head of research at GMA Capital, in time to cover another $4 billion in payments in July.
Falling borrowing costs since the election have already sparked a rush to international issuance of dollar-denominated debt by Argentine companies and provincial governments.
Yields could fall further in the coming months, analysts say, if Milei succeeds in passing his proposed 2026 budget, as well as tax and labor reforms seen as key to supporting sustainable economic growth. His La Libertad Avanza coalition more than doubled its minority in both houses of Congress, which reopens this Wednesday.
However, analysts said continued concerns over Argentina’s very scarce hard currency reserves limited the decline in borrowing costs.
The central bank’s reserves, which stand at $41.7 billion, are almost entirely made up of loans and are far from the target set by the IMF’s (International Monetary Fund) program of $20 billion with Argentina.
Milei has rejected calls from investors to eliminate the country’s longstanding currency and capital controls, which many blame for depleting reserves and fueling fears that Milei will be forced to abruptly devalue the peso, leading to a damaging run on the currency in September.
Caputo said at the investor event on Tuesday that he would not rush dollar purchases because it would weaken the peso. Instead, he said the country’s main source of dollars in the coming months would be a wave of foreign investment unlocked by Milei’s policies.
Gabriel Caamaño, an economist at Argentine financial consultancy Outlier, said the sale of domestic debt was an attempt by Caputo “to silence rumors about exchange controls.”
He added: “They want to show that they can regain access to the international market to replenish their reserves and then lift controls, rather than the other way around, as everyone says they should do.”
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