Moody's fires warning at Argentine bond-issuing companies

Published: 2025-06-30 05:00:15 ET MCO

Published on 06/30/2025 at 05:00

Moody's has issued a warning about deteriorating financing conditions for Argentine bond-issuing companies in its 2025/26 Corporate Credit Risk Outlook, highlighting reduced liquidity in local capital markets and rising borrowing costs.

The rating agency identified a sharp decline in demand for dollar-linked instruments beginning in 2023, with the fourth quarter of 2024 marking a particularly steep deterioration. This trend stems from recent corporate sector defaults that have elevated refinancing risks for other issuers across Argentina's bond market.

The financing challenges are reflected in dramatically higher borrowing costs, with Bloomberg Línea reporting that average dollar-linked bond issuance rates surged to 8.9% in Q4 2024, compared to just 2.2% in the same period the previous year. This four-fold increase underscores the growing risk premium investors demand for Argentine corporate debt.

Market dynamics showed mixed signals in early 2025, with hard dollar bonds reaching $1.093bn in Q1 2025, representing a 110% y/y increase. However, dollar-linked bond issuance collapsed to a mere $2mn, highlighting the stark divergence in investor appetite between different instruments.

Despite these concerning corporate financing trends, Moody's maintains an optimistic view of Argentina's broader economic trajectory. The agency expects inflation to moderate to 30% by the end of 2025 as President Javier Milei's austerity program continues.

This divergence between corporate financing difficulties and macroeconomic optimism presents a complex challenge for Argentina's business sector. While Milei's reforms may stabilise the broader economy, companies face immediate liquidity constraints that could hamper investment and growth, potentially undermining the government's economic recovery objectives.