“The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,” US treasury secretary Scott Bessent said in announcing the actions on X.
Argentina’s 2035 bond rose 4.5 cents to trade at 60.5 cents on the dollar, while the peso closed at 1,418 per dollar, up 0.8% on the day after falling 3% earlier.
Local stocks rose 5.3% yesterday. Last month, they touched a 2025 low, days before Bessent’s initial support pledge.
Argentine stocks traded in US exchanges rallied 13%.
Bessent issued his statement at the end of four days of meetings with Argentine finance minister Luis Caputo, which also involved officials from the International Monetary Fund IMF).
In April, the IMF granted Argentina a new US$20 billion loan programme.
A spokesman for the IMF did not immediately respond to a request for comment on the US actions.
“Argentina faces a moment of acute illiquidity,” Bessent said in his post. “The international community – including @IMFNews – is unified behind Argentina and its prudent fiscal strategy, but only the US can act swiftly. And act we will. To that end, we directly purchased Argentine pesos,” he added.
A US Treasury spokesman declined to provide any further details, including on the amount of pesos purchased and how the US$20 billion currency swap line would be structured.
Democratic lawmakers in the US Senate complained that Trump was moving to provide financing to bail out a foreign government and global investors, even as the US government has been shut down.
Backstop for Milei
Previously, Bessent had pledged the use of the Treasury’s US$221 billion Exchange Stabilization Fund and its holdings of IMF reserve assets known as Special Drawing Rights to support Argentina.
The backstop is partly aimed at giving Argentina’s right wing president, Javier Milei, a boost in Argentina’s Oct 26 mid-term legislative elections.
His party wants to strengthen its minority position to solidify his agenda to cut government spending and boost private-sector investment.
Argentine lawmakers are working to limit what the president can do via decrees, raising the stakes for Milei’s party in the midterms.
Although the effect on financial markets was immediate, there was no guarantee the US backstop will improve Milei’s party’s election prospects as public dissent over his austerity measures has grown.
UBS’s Shamaila Khan, head of fixed income for emerging markets and Asia Pacific, said the announcement was likely to bolster prospects for Milei’s party.
Kathryn Exum, co-head of sovereign research at Gramercy, said the midterms remain the major event, as are a policy and FX adjustment after the vote.
Bessent called the success of Milei’s reforms of “systemic importance,” to the US by helping to anchor a prosperous Western Hemisphere.
‘Closest of allies’
Milei, who is due to meet Trump next week during the IMF and World Bank annual meetings in Washington, thanked Bessent and President Donald Trump in a message on X.
“Together, as the closest of allies, we will make a hemisphere of economic freedom and prosperity. We will work hard every day to provide opportunity for our people,” Milei wrote.
Investors greeted the intervention with a sigh of relief.
Eduardo Ordonez Bueso, emerging markets debt portfolio manager at BankInvest, said markets had been hungry for details of Bessent’s support pledge and had been challenging peso valuations.
“If they hadn’t come through with a promise they made…we would be talking about a complete collapse of Argentina,” he said.
Several US Senate Democrats introduced legislation that would prohibit the use of the Exchange Stabilization Fund to bail out Argentina and global investors.
The measure is largely symbolic, as Democrats remain the minority in both chambers of Congress.
“It is inexplicable that President Trump is propping up a foreign government, while he shuts down our own,” said senator Elizabeth Warren, referring to the partial government shutdown due to lack of funding.
“Trump promised ‘America First,’ but he’s putting himself and his billionaire buddies first and sticking Americans with the bill,” said Warren, the top Democrat on the Senate Banking Committee.