Argentina’s Debt Plan Hits Wall as Dollar Bonds Stall

Argentina has gone two months without a domestic Bonar dollar bond sale, leaving the government’s plan to cover next year’s debt payments more exposed as borrowing costs rise. Yields have climbed more than 500 basis points to above 12%. The pause marks the longest since the programme began in February, while higher global borrowing costs have also dashed hopes for a first international bond sale.

The squeeze hits a country where economic growth is stalling, inflation remains stubbornly high and fears of unemployment are mounting. The government faces about US$25 billion in hard-currency debt payments next year, with maturities extending through 2030. Those payment dates don’t shift with conditions for people below the negotiating table.

Who Has the Financing Power

The government had planned to sell almost US$1 billion more in the local market this year and another US$5 billion in 2027. Its strategy for meeting debt obligations without relying on global bond markets rested on Central Bank dollar purchases, privatisations, multilateral financing and local bond sales. That last option is weakening.

“When authorities had the chance to smooth next year’s financing schedule, they chose not to, arguing that all-in yields were too high,” said Armando Armenta, senior economist at AllianceBernstein. “Now, that decision implies the 2027 election season will be bumpy.”

Local investors are already pricing the election into the debt. They’ve distinguished between dollar bonds maturing before and after the October 2027 vote, and the yield gap between the two widened to almost 500 basis points, according to data compiled by Bloomberg. The election approaches. Debt payments remain.

The Swap Is No Simple Escape

Economy Minister Luis Caputo said Wednesday the government still expects to issue local bonds next year, but could turn to a currency swap with China if it can’t. He pointed to Argentina’s US$19-billion swap line with China’s central bank, including about US$5 billion that can be used to repay debt. That amount roughly matches the planned 2027 issuance of local-law dollar bonds.

But the swap provides yuan to Argentina’s Central Bank, not dollars directly to the Treasury, and its terms aren’t fully public. It isn’t a direct replacement for dollar bonds. Previous administrations used some of the swap to meet obligations to multilateral lenders such as the IMF and to pay bondholders.

Election-Year Dollars, Privatized Assets

Argentina explored an international bond sale in early 2026 and hired Alejandro Lew as finance secretary to lead the plan. Milei rejected issuing debt because of the cost, and Lew resigned. Another opening came around June, after rating upgrades pushed sovereign spreads toward 400 basis points, their lowest in about eight years, and all-in yields below 9%. Caputo again held off, preferring cheaper financing available elsewhere, including the local dollar market.

“It probably would have been a good idea for Argentina to issue internationally back then, and strengthen its reserves,” said Ramiro Blazquez, a Latin America strategist at StoneX. “Now it looks more complicated because I don’t see spreads falling meaningfully before the election.”

The government says it has built resources to defend the peso before elections. Milei put the arsenal at roughly US$75 billion, including Central Bank dollar purchases, US$20 billion each in swap lines with the United States and China, and expected additional financing from banks and multilateral lenders. “We know that next year we have presidential elections,” Milei said this month in Paris. “That’s why we’ve spent this entire year getting ahead of it and preparing a bazooka of dollars.”

The government has also announced the privatisation of water utility AySA, while the Central Bank accelerated greenback purchases this month. Investors continue to show interest in Argentine debt, with double-digit yields attracting buyers who remain persuaded by Milei’s economic overhaul. Lamine Bougueroua, EM fund manager at Carmignac, one of the largest holders of Argentine debt, called the sell-off “more of an entry point to increase relative to developed market bonds.” “They still need to raise some dollars – but at this point, I think they will be able to do that.”