Limited Profit from the U.S. Treasury Intervention in Argentina

Strong Rise in Argentine Markets

The Argentine stock market and government bonds saw significant gains following the unexpected victory of President Javier Milei's party in the parliamentary elections held on Sunday. The impact of this election result on investors has increased hopes that Milei's free market reforms will not have a negative effect.

Market Increases Recorded

Government bonds, which had seen a decline before the voting, gained in value across all maturity periods. Notably, the 2035 dollar-denominated bonds rose by 14% to 71.26 cents. The country’s main stock index showed an increase of 23%, marking Milei’s largest jump since the November 2023 elections. The Argentine peso also closed the session up 3.8%, although the initial 10% increase moderated somewhat.

Effects of U.S. Intervention

U.S. President Donald Trump stated that the intervention in Argentina has been "very profitable" from a sectoral perspective. However, the actual extent of the profits gained remains a topic of debate. At Monday's close, it was observed that the latest peso acquisition by the U.S. Treasury resulted in a profit of approximately 1%-2% based on market movements.

U.S. Treasury Strategy

According to related information, the Treasury intervention began on October 9 and reached a total volume of approximately 2 billion dollars. Furthermore, starting from October 16, it was noted that the peso gained 4% in value, reaching its highest level. The exchange rate between the peso and the dollar was taken into account for determining the final profit. However, it is likely that the pesos obtained by the Treasury will provide even higher returns through interest-bearing accounts at the Argentine central bank.

Market Analyst Views

Alejandro Cuadrado, the global head of Latin American currency strategy at BBVA, noted that the peso is the "missing piece of the policy puzzle," stating, “The positive election results provided much-needed relief, but some recalibrations will be necessary.”