Country risk over 600 points as US hikes interest rates

Argentina's country risk, a measure of its borrowing costs abroad, has surged to 602 basis points in the most recent week. This increase, which contrasts with the 402 points recorded in mid-July, reflects rising uncertainty over next year's elections, recent economic data and lower Central Bank reserve purchases. The jump comes on the heels of recent volatility in U.S. Treasury bonds, whose yields hit levels not seen in over two decades.

Analysts attribute the rise to both global and domestic factors. On the international front, the rise in risk-free interest rates, particularly the 5.9% yield on 30-year U.S. Treasury bonds, makes investing in emerging markets less attractive compared to the higher-yielding Treasuries. Additionally, the ongoing conflict in the Middle East and the consequent need for the U.S. government to continue financing the war exacerbate inflation concerns and strain fiscal balances, further influencing global interest rates.

Locally, Argentina's economic challenges, with poverty rising to 32% and economic activity declining by 2.9% monthly in July, have also contributed to the increased country risk.