EM LATAM CREDIT: Argentina: US Support Update - Positive
(ARGENT; Caa1/CCC/CCC+)
The US is attempting to prevent excessive volatility by offering a USD20bn swap line to support the FX going into and through the October national congressional elections (mid-terms). The US pledge to be "ready" to buy up the country's USD bonds puts somewhat of a floor on prices. ARGENT 35s are up 4 points today.
We wouldn't be surprised to see some profit taking but also expect further details on the US support package will continue to be positive. We see a closing price of 61.65 from September 5th, before the Province of BA elections so have now fully recovered from that stinging political loss.
We don't think it necessarily guarantees access to the international market next year. President Milei still has a lot of heavy lifting on the political front and we are optimistic that he will ultimately succeed with plenty of horse trading in between.
We think the next step will be for Milei to improve relations with his allies that helped him win the election in 2023, the PRO (Propuesta Republicana) party and its leader ex-President Mauricio Macri. That alliance has been badly fractured and Macri recently said he hadn't seen Milei in over a year. Macri knows he has leverage and is using it to improve his position, but ultimately he doesn't want the Peronist opposition to return to power.
Ultimately, Argentina needs access to the international markets and this US action buys the government some time to shore up support. You only need to go back about 10 years to when a market friendly president (Macri) attempted reforms, issued tens of billions of bonds and then the country defaulted within five years later.
The big loss in the Province of Buenos Aires local elections and the strengthening of the opposition signaled to the market a warning sign of a repeat of that experience. The US action stabilizes the market and adds liquidity to suppress fears of a near term default but now looking forward the market will need to see signs of Milei's political power returning.
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US DATA: Building Permits Revised Up Slightly, Single Family Activity Still Weak
July's building permits were revised up in the final reading to 1,362k (annualized, seasonally-adjusted), vs 1,354k in the initial estimate. That got the data a little closer to the 1,386k consensus estimate going into the initial reading last week, though either way it is a pullback from 1,393k in June (a 2.2% fall vs the 2.8% initially recorded).
- The upward revision was due to both single family permitting getting revised up 5k to 875k, and multi-unit up 3k (to 487k).
- That's still a 7.6% M/M fall for multi-units, biggest since January, with single-family confirming the first rise since February.
- Overall though single family permitting has been slowing faster than for multi-units (single family = down 7% Y/Y, multis down less than 1% Y/Y), unsurprising given historically low homebuilders' confidence and rising single-family new home supply amid high mortgage rates.
- As a leading indicator of starts, this suggests residential investment will continue to be a drag on GDP growth.
MNI: BELGIUM AUG BNB BUSINESS CONFIDENCE -8.9
- MNI: BELGIUM AUG BNB BUSINESS CONFIDENCE -8.9
FRANCE T-BILL AUCTION RESULTS: 13/26/28/50-week BTFs
| Type | 13-week BTF | 26-week BTF | 28-week BTF | 50-week BTF |
| Maturity | Nov 26, 2025 | Feb 25,2026 | Mar 11, 2026 | Aug 12, 2026 |
| Amount | E3.198bln | E600mln | E2bln | E2bln |
| Target | E2.8-3.2bln | E0.2-0.6bln | E1.6-2.0bln | E1.6-2.0ln |
| Previous | E3bln | E1.999bln | E1.997bln | |
| Avg yield | 1.974% | 1.963% | 1.995% | 1.994% |
| Previous | 1.963% | 1.973% | 1.980% | |
| Bid-to-cover | 2.43x | 6.93x | 2.82x | 3.37x |
| Previous | 3.00x | 3.46x | 2.56x | |
| Previous date | Aug 18, 2025 | Aug 18, 2025 | Aug 18, 2025 |
