Argentina’s tax revenue rose to 21,513bn in May from 17,400bn in the prior month, a month-on-month increase of 4,113bn. The data point to stronger nominal collections over the period.
On the same comparison, May receipts were about 23.6% higher than April. The figures relate to aggregate tax intake and are presented in billions.
Fiscal Health and Broader Economic Indicators
The May tax revenue figure, showing a significant month-over-month increase to 21.5 trillion pesos, is a strong confirmation of Argentina’s improving fiscal health. We view this as a direct result of the ongoing economic reforms successfully boosting collection and formalizing economic activity. This positive data point should provide a tailwind for Argentine assets in the near term.
This result adds to a series of positive economic indicators we have been monitoring. Monthly inflation has now remained in the single digits for several consecutive months, a sharp contrast to the hyperinflationary environment of previous years. Furthermore, central bank data released last week shows net international reserves have continued to accumulate, reaching their highest level in over four years.
Market Implications and Investment Strategies
For currency derivatives, the stronger fiscal anchor reduces the pressure for monetary emissions to finance the government, which should dampen peso volatility. We believe the implied volatility in USD/ARS options is still too high given the improved fundamentals. Selling out-of-the-money USD/ARS calls or implementing put spreads on the dollar could be attractive strategies.
In equity markets, the Merval index has historically responded very positively to signs of fiscal discipline and macroeconomic stability. With corporate earnings set to benefit from a more predictable economic environment, we are positioning for further upside. We will be looking to add to long positions in Merval index futures contracts expiring in the third quarter.
The country’s credit risk profile also continues to improve on this news, making its sovereign debt more attractive. Argentina’s 5-year Credit Default Swap (CDS) spreads have already compressed significantly from over 2,000 basis points in early 2025 to just under 950 last week. We see further tightening ahead and believe selling CDS protection on Argentine sovereign bonds offers a compelling risk-reward scenario.
