The Big Idea
Argentina | Shift to ‘B’
This material is a Marketing Communication and does not constitute Independent Investment Research.
S&P beat Moody’s to the upgrade for Argentina within the last week and slipped in a ‘B-‘ without any warning and well ahead of the annual S&P yearend review. That gives the country a composite ‘B-‘ rating, lifting investor demand and tightening spreads. A likely upgrade from Moody’s sometime in July would take Argentina out of the’ CCC’ category. That should invite debate about relative value, specifically against Ecuador, and raise the possibility of debut re-entry to Eurobond markets and cross curve trades. My earlier recommendation for longer tenors on Argentina’s sovereign curve now shifts to shorter tenors on prospects of bullish curve steepening.
Credit ratings matter, especially when a sovereign credit enters and exits a rating category. Crossing over the ‘CCC’ threshold into the ‘B’ category recognizes the drop in credit stress and the success of the economic stabilization management. This is particularly important for Argentina, which suffers maybe from the reputational penalty of past policy management under Kirchnerismo and the weight of an abundant stock of Eurobonds. The demand side is important, too, with upgrades into the ‘B’ category encouraging participation from conservative real money investors. If Moody’s soon follows with another ‘B’ rating, then Argentina has the potential to soon fully exit the ‘CCC’ category.
The rating upgrade from Moody’s is still my base case scenario. There is positive momentum among the rating agencies to shift Argentina back to the ‘B’ category with preemptive and unannounced rating upgrades over the past few weeks. The uplift from the lowest rating category can happen quite quickly without outlook revisions. There is typically flexibility for a proactive approach within the still low ‘B’ rating category and stronger arguments considering the impressive track record of Argentina’s Milei administration.
The initial reaction to the S&P upgrade has been a downward shift of the curve and closer realignment to ‘B’ peers. There is still a stubborn 75 bp spread premium relative to Ecuador. Will this further narrow if Argentina completely exits the ‘CCC’ rating category?
The recovery back below 9% yields provides broader financing flexibility for Argentina and creates incentives to re-access Eurobond markets. The policy preference has been for fully financing the budget in the local markets and only accessing external credit under the most favorable terms. The crossover below 9% Eurobond yields may force a reassessment of directly accessing Eurobond markets. This would allow for a more straightforward rollover of the July Eurobond payments and also maybe encourage proactive debt liability management. This would reinforce supportive technicals on reducing liquidity risks with no net new issuance under the fiscal anchor and priority local market funding.
There have been many sovereign credits that have opted for active debt liability management while limiting any new Eurobond supply, such as Ecuador and Panama. This provides the virtuous circle of reinforcing the positive credit momentum on lower liquidity risks while also lowering the cost of financing on tighter supply-and-demand dynamics. The proactive reduction of liquidity risks is highly relevant considering bulky front-loaded US dollar payments.
The markets may anticipate the logical next steps with lower yields encouraging market access and shifting towards the shorter tenors to exploit the potential of active supply-and-demand debt management. The bullish curve steepening in Ecuador also serves as a leading indicator on how best to re-enter Eurobond markets to effectively lower funding costs. Our preference for the longer tenors on the credit rating upgrades now shifts to the shorter tenors (2030s) on the prospects for relative intra-curve outperformance and still a constructive overweight on the high yield premium to other emerging markets peers.
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Important Disclaimers
Copyright © 2026 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.
Important disclaimers for clients in the EU and UK
This publication has been prepared by Trading Desk Strategists within the Sales and Trading functions of Santander US Capital Markets LLC (“SanCap”), the US registered broker-dealer of Santander Corporate & Investment Banking. This communication is distributed in the EEA by Banco Santander S.A., a credit institution registered in Spain and authorised and regulated by the Bank of Spain and the CNMV. Any EEA recipient of this communication that would like to affect any transaction in any security or issuer discussed herein should do so with Banco Santander S.A. or any of its affiliates (together “Santander”). This communication has been distributed in the UK by Banco Santander, S.A.’s London branch, authorised by the Bank of Spain and subject to regulatory oversight on certain matters by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The publication is intended for exclusive use for Professional Clients and Eligible Counterparties as defined by MiFID II and is not intended for use by retail customers or for any persons or entities in any jurisdictions or country where such distribution or use would be contrary to local law or regulation.
This material is not a product of Santander´s Research Team and does not constitute independent investment research. This is a marketing communication and may contain ¨investment recommendations¨ as defined by the Market Abuse Regulation 596/2014 ("MAR"). This publication has not been prepared in accordance with legal requirements designed to promote the independence of research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The author, date and time of the production of this publication are as indicated herein.
This publication does not constitute investment advice and may not be relied upon to form an investment decision, nor should it be construed as any offer to sell or issue or invitation to purchase, acquire or subscribe for any instruments referred herein. The publication has been prepared in good faith and based on information Santander considers reliable as of the date of publication, but Santander does not guarantee or represent, express or implied, that such information is accurate or complete. All estimates, forecasts and opinions are current as at the date of this publication and are subject to change without notice. Unless otherwise indicated, Santander does not intend to update this publication. The views and commentary in this publication may not be objective or independent of the interests of the Trading and Sales functions of Santander, who may be active participants in the markets, investments or strategies referred to herein and/or may receive compensation from investment banking and non-investment banking services from entities mentioned herein. Santander may trade as principal, make a market or hold positions in instruments (or related derivatives) and/or hold financial interest in entities discussed herein. Santander may provide market commentary or trading strategies to other clients or engage in transactions which may differ from views expressed herein. Santander may have acted upon the contents of this publication prior to you having received it.
This publication is intended for the exclusive use of the recipient and must not be reproduced, redistributed or transmitted, in whole or in part, without Santander’s consent. The recipient agrees to keep confidential at all times information contained herein.
