12 June 2019 by jbchevrel
Emerging market risk looked rather firm, as a whole, with the benchmark CDX EM s31 tightening 3bp on the day (London close), not far below 96 cents on the dollar, with Argentina (6% of the on-the-run index) the main mover. Argy rally effectively happened last night after our close, triggered by Macri picking Senator Pichetto (PJ) as his Vice-President. The latter was the leader of the opposition Peronist caucus in the Senate and a member of the Alternativa Federal group of Peronists who have, in the past, dissented against Mrs Kirchner. In his own camp, members of Cambiemos expressed support. Markets took that positively as it could broaden Macri’s spectrum, and although Pichetto does not sound like a super popular politician (i.e. he is not expected to directly add many many votes), that latest tactical move might drag other Peronists to the Macri’s camp in the future (Mr Urtubey will be key to watch, in particular). Across other asset classes, the Merval index gained more than 6% and ARS/$ came up more than 2.5%. The prospects of dovish Fed have also been supportive of Argentina lately. No later than this PM, the dollar also came weaker on the back of lighter than expected inflation data.