Argentina’s bonds jump after pro-dollarization candidate Javier Milei wins presidency

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Argentina’s dollar-based markets are swinging up, after libertarian candidate Javier Milei won the presidential runoff election on Sunday. 

The wider-than-expected victory of the pro-dollarization candidate led to the largest intraday gain for bonds since January, Bloomberg reported. Early Monday, Argentine dollar bonds due in 2041 rose 6.7%, hitting 30 cents on the dollar.

The election’s result also catapulted US-listed Argentine stocks up, with shares in oil producer YPF rocketing 36% in morning trade. Similarly, Grupo Financiero Galicia and Banco Macro, two regional lenders, rose 24% and 20%, respectively.

Through the week, investors can also watch for swings in the peso exchange rate. Though a national holiday kept the domestic market closed on Monday, the peso had already shed 8% since Friday in the country’s informal markets, which are more attuned to free market flows.

And peso levels are likely to keep eroding, especially if Milei is successful in implementing his economic reforms. 

Through the election, the political outsider gained popularity on an idea to abandon the peso and adopt the US dollar, in an effort to rein in Argentina’s runaway inflation.  

While full dollarization has been met with some criticism from economists and business leaders alike, Milei’s surprisingly wide 56%-to-44% victory over opponent Sergio Massa may signal that Argentines are willing to take a chance on more radical approaches.

“The model of decadence has come to an end, there’s no going back,” Milei said in a speech that followed the election results. 

But despite the win, a slew of challenges remain, such as his scarce support in Argentina’s Congress.