These are the eight reasons that explain the sharp rise in country risk

France pulled the trigger. European bonds fell just like Asian and US bonds, which had begun to recover. French bond yields are approaching 5%, aggravated by protests demanding increases in education spending and other benefits when the fiscal deficit is close to 6% of GDP and is the sixth consecutive of great magnitude. French debt grew to cover that deficit, amid an escalation in oil prices that drove inflation, reduced activity and income, and unleashed violent protests across the country. ADVERTISEMENT Meanwhile, US bond yields rose by 12 basis points, to 5.14%, after registering gains during the night. The unstable international scenario also affected Argentina: debt bonds fell between 0.5% and 1.5%, while country risk rose by 27 units, 4.2%, to 675 basis points. The causes? A Grit Capital Group report enumerated the technical reasons for the move, after stating that it occurs despite signs of improvement in the local macroeconomy: - Global GD35, GD38, and GD41 fell again by 1.3% to 1.5%. Argentina's CDS (what the market demands as coverage) for 2 years rose again to 753 basis points. Banks that sell protection can cover their exposure by selling short bonds. In a market with little liquidity, these operations can amplify the declines. - Argentina lost a key buyer: the local investor. The participation of residents in the Globales fell from a high of nearly 33% to 20.4%. Part of that demand migrated to the USD 5.3 billion in Bonares issued this year. - In addition to the lower local demand, there are USD 4 billion in payments of profits and dividends to the exterior between January and September. With fewer domestic buyers, sales of international funds have a greater impact on prices. - Many US funds close their fiscal year on October 31st. Portfolio reorganization and risk reduction could be pressuring Argentine bonds, even without significant changes in the macroeconomy. - Brazil is capturing the attention of funds specializing in Latin America. Its presidential election concentrates expectations and capital. Argentina, meanwhile, faces a shortage of immediate catalysts to reactivate demand. - Europe adds uncertainty. European banks fell by 2.6% in dollars and the French 10-year rate rose by almost 13 basis points. However, during the European crisis of 2010 to 2012, emerging market debt in dollars showed positive performance. - In Argentina, September inflation was 1.9%, but housing and public services increased by 3.1%. The subsidy adjustment pressures regulated prices. However, a slowdown in weekly inflation was detected at 0.16%. - The fall in bonds does not necessarily reflect a macroeconomic deterioration. Lower local demand, CDS hedges, and fund sales explain part of the pressure. The challenge will be to recover buyers and catalysts before 2027. The unknown is when the deterioration will stop. One of the answers points to the end of the conflict in the Middle East and the stabilization of markets, affected by doubts about the evolution of artificial intelligence and the political and economic crisis in Europe. ADVERTISEMENT Some see a long horizon for price recovery. Mariano Ortiz Villafañe, chief economist at Aldazabal y Cía., opined that "sovereign bonds remain pressured by a global financial environment of high uncertainty that is especially challenging for emerging fixed income, to which Argentina's extremely cautious positioning regarding the 2027 electoral process is added." "Although we are quite optimistic about the improvement of domestic fundamentals, we expect months of high volatility associated with electoral expectations and we do not see clear short-term catalysts that could drive a significant compression of country risk," added Ortiz Villafañe. ADVERTISEMENT This situation boosted a rise of nearly 0.15% in the dollar worldwide, although it did not affect the local exchange market. In the Libre Mercado de Cambios (MLC), USD 605 million were traded, and the Central Bank moderated its purchases, with a positive balance of 18 million dollars. According to consultant F2, led by Andrés Reschini, the lowest amount of foreign currency purchase "probably is due to lower off-screen settlement that fueled block purchases. In futures, 1,028,458 contracts were traded and open interest added USD 19 million after showing unwinding in the previous two rounds. Adjustments were upward, in the same direction as the spot while the implied ones moved downward." ADVERTISEMENT The wholesale dollar rose $6.50 to 1,524.50 pesos. In the financial market, the MEP increased $4 (+0.3%) to 1,540.60 pesos. The cash with settlement (CCL), which marks the direction of dollars outside the peg, advanced $10.5 (+0.7%) to 1,623.58 pesos. The "blue" increased $5 (+0.3%) and closed at 1,560 pesos. The positive data was contributed by the September trade balance with a surplus of 2.976 billion dollars. In constant terms, it is the largest in the century. The explanations must be sought in agro, energy, and mining. The result of the trade balance explains why the dollar is not affected by the fall in sovereign bonds. ADVERTISEMENT In the financial sphere, the Stock Exchange had another negative session. The Merval of leading stocks fell 1.8% in pesos and 2.4% in dollars. Transener (-5.5%) and Edenor (-5.1%) were the losers due to the tariff issue. There was only one rise, which corresponded to IRSA with 0.9 percent. The interest rates of the Capitalizable Bills (LECAP) fell. Instruments maturing on April 30th offer yields barely above 2%, while medium-term ones pay up to 1.89 percent. Last night, in overnight operations, two of the three main indices of the New York Stock Exchanges registered slight increases. However, the Nasdaq, with its strong technology weight, moved into negative territory. This raised doubts about whether the 1.11% gain recorded yesterday was just a "dead cat bounce" after the two negative sessions of last week. ADVERTISEMENT Artificial intelligence continues to generate doubts while waiting for the earnings reports of Tesla, SpaceX, Netflix, and Meta Platforms. There are not many illusions with Netflix, but there could be a bet that there will be a change of direction in the company after the firing of a thousand employees and the change of CEO. The stock loses 26% so far this year and the number of subscribers has fallen. On the other hand, gold traded with a slight decline, while oil retreated by barely 0.15% and the Brent barrel traded above $109. As long as oil remains at these levels, US Treasury bonds will continue with high yield rates. ADVERTISEMENT The dollar showed a slight retreat against the world's main currencies. French bonds continued to trade at a low level and affect all bonds on the continent, including those of Japan, which after increasing their quote last night lost ground and returned to yield rates of 3 percent. The scenario remains complicated for Argentina.