Argentina bonds, peso extend rally ahead of expected Trump-Milei meeting

By Rodrigo Campos and Karin Strohecker

NEW YORK/LONDON, Sept 23 (Reuters) - Argentina's international bonds rose and the peso strengthened almost 5% against the dollar, ahead of an expected meeting between U.S. President Donald Trump and Argentine leader Javier Milei to discuss U.S. support for the right-wing South American leader's economic plan.

The gains add to a rally on Monday for Argentine assets after U.S. Treasury Secretary Scott Bessent said "all options" of support were on the table for Argentina, including swap lines and direct currency purchases from Washington.

Tuesday's moves lifted bonds up as much as 2.3 cents before they retraced some of their gains, still up more than 1 cent on the dollar, data from MarketAxess showed 040114HU7=1M. The peso ARS=RASL rose 3.4% to the dollar after a near 5% gain on Monday.

Stocks were mixed, with the local benchmark .MERV down 2% after a Monday gain near 8% and shares traded in U.S. exchanges .BKAR up 1%.

WHAT WILL U.S. SUPPORT LOOK LIKE?

The country's embattled peso currency strengthened nearly 5% to the dollar, mirroring the Monday move and in sharp reversal to last week, when the Argentine central bank burned through more than $1 billion of reserves to defend its currency. ARS=RASL

Lack of detail on what the Trump administration would provide to Argentina had investors speculating on the shape and size of the support.

"The U.S. support announcement is significant," said Simon Waever, a strategist at Morgan Stanley.

"A loan perhaps tied to future U.S. investments seems more realistic than the U.S. buying ARS (peso) or a swap facility."

Earlier this year, Argentina renewed a $5 billion swap line with China's central bank, which forms part of an overall $18 billion facility with the PBOC that has helped the South American nation to shore up its reserves, but has also drawn ire from Washington.

MILEI'S REFORMS ON TRACK?

Financial assets of Argentina, a serial defaulter on its debt, have been on a rollercoaster in recent months and years.

Investors have broadly warmed to Argentina since Milei became president in December 2023 and launched an ambitious reform program.

However, markets have fallen sharply in recent weeks, with international bonds still down near 10% for the year and the peso coming under pressure after corruption allegations inside Milei's inner circle and a larger-than-expected loss in a local election in Buenos Aires triggered concern over his ability to reshape the economy.