Argentine financial markets staged a dramatic recovery on September 22 as Washington signalled unprecedented support for President Javier Milei's embattled administration, with US Treasury Secretary Scott Bessent declaring that "all options are on the table" to stabilise Latin America's third-largest economy.

The intervention throws a lifeline to Argentina, where sovereign bonds had plummeted more than 20% this year, whilst the Central Bank burnt through over $1bn in reserves last week alone defending the peso. According to Infobae, country risk had approached 1,500 basis points before today’s rally, with bonds trading at yields exceeding 25 %—levels that typically presage default.

"Argentina is a systemically important ally of the United States in Latin America, and the Treasury Department stands ready to do whatever is necessary within its mandate to support Argentina," Bessent stated on X, ahead of a high-stakes meeting between Milei and US President Donald Trump scheduled for September 23 in New York.

The Treasury Secretary specified that support mechanisms could include swap lines, direct currency purchases, and acquisitions of dollar-denominated sovereign debt through the US Exchange Stabilisation Fund. Speaking to reporters, Bessent emphasised that any US intervention would be "big and forceful" and would not impose new conditions on Buenos Aires.

Markets responded enthusiastically to Washington's pledge. The index of Argentine stocks traded on US exchanges surged nearly 12 %, whilst the 2046 bond jumped 6.7 cents to 53.85 cents on the dollar, according to MarketAxess data cited by Reuters. Country risk compiled by JPMorgan plunged 302 basis points in a single day to 1,140 points, and the peso strengthened 2% to 1,446 per dollar, retreating from the upper limit of its trading band.

The rally coincided with the Argentine government's announcement that it would temporarily eliminate export taxes on all grains through October, a measure designed to encourage dollar inflows ahead of crucial midterm elections on October 26. "Fiscal balance is not negotiable," stated presidential spokesman Manuel Adorni.

The US intervention comes at a critical juncture for the libertarian administration, which has faced mounting pressure following corruption allegations within the president's inner circle and a larger-than-expected defeat in Buenos Aires provincial elections earlier this month. These setbacks have raised questions about the libertarian leader's ability to push through his radical economic reform agenda.

"Argentina's assets were in desperate need of a circuit breaker—and they just got one," said Alejo Czerwonko, chief investment officer for emerging markets in the Americas at UBS, as quoted by Reuters. "Bessent's intervention carries outsized weight at this fragile juncture. It provides the Milei administration with a critical window to reorient ahead of October's midterms."

The October elections loom large over market sentiment. According to analysts, a favourable outcome would help contain the investor anxiety ignited by the Buenos Aires vote, though a poor showing could further complicate Milei's reform efforts.

Yet despite the September 22 rebound, significant challenges remain. Even after the sharp gains, Argentine eurobonds continue to trade at elevated yields between 16 and 26 % across maturities—levels that effectively lock the country out of international capital markets.

Argentina faces nearly $10bn in debt payments scheduled for January and July 2025, with $4bn due in January and $4.5bn in July. Foreign Minister Gerardo Werthein, already in New York awaiting the Argentine delegation, denied reports of a $30bn loan negotiation with the US Treasury, though he acknowledged that Economy Minister Luis Caputo and his team were working on securing support for "a much smaller amount," La Nacion reported.

The format of the September 23 meeting will follow what's known as "President plus three" protocol, with Milei accompanied by Werthein, Caputo, and his sister Karina Milei. On the American side, Bessent confirmed his attendance, with Secretary of State Marco Rubio also expected to participate.

Washington's willingness to backstop Argentina reflects broader geopolitical considerations. The Trump administration views Buenos Aires as a crucial ally in countering Chinese influence in Latin America, where Beijing has steadily expanded its economic footprint through infrastructure investments and commodity purchases.

Argentina currently maintains an $18bn currency swap arrangement with China's central bank, of which $5bn remains outstanding from the previous Peronist government. The potential US support, sources cited by Ambito suggest, could take the form of a similar swap arrangement, which would have the advantage of avoiding the need for Congressional approval required for new debt under legislation passed by former economy minister Martín Guzmán.

Bessent, who visited Buenos Aires in April, said that he saw no risk of financial contagion from Argentina's current difficulties. He also indicated satisfaction with the position of International Monetary Fund Managing Director Kristalina Georgieva, with whom Milei has rescheduled a meeting for September 23 afternoon.

Argentina's $44bn programme with the IMF, renegotiated under Milei in April, has seen $14bn in disbursements following July's approval of the first review, which released $2bn. The Fund has signalled flexibility on technical targets, acknowledging that reserve buffers were "taking longer to rebuild" than anticipated whilst praising the government's delivery of primary surpluses and success in bringing monthly inflation below 2% for four consecutive months. However, net international reserves remain at what the IMF describes as "critically low" levels, with a further $6bn contingent on meeting year-end targets.

Whilst the latest developments provide vital breathing room, economists caution that fundamental challenges persist. The Central Bank's own projections show the peso weakening further, with the upper trading band expected to reach 1,494 pesos per dollar by the October elections and 1,526 by year-end.

"The volatility of recent weeks had an essentially political origin," observed Adrián Yarde Buller, chief economist at Facimex Valores, as quoted by La Nacion. "This uncertainty will not be resolved until we have the results of the October election in hand, and therefore, the volatility will persist."

Brad Setser, a former US deputy assistant treasury secretary now at the Council on Foreign Relations, warned that directly purchasing pesos would represent "an innovative and risky use" of the Exchange Stabilisation Fund, noting uncertainty about whether the peso could maintain its current trading range.

For now, markets are betting that US support will provide sufficient backing for Milei to navigate the immediate crisis. The president ended his response with his signature rallying cry on X: "Those of us who defend the ideas of freedom must work together for the well-being of our people. See you on Tuesday in New York. Long live freedom, damn it!"

Whether that cherished freedom extends to Argentina's beleaguered financial markets remains to be seen. The upcoming meeting in Manhattan may well seal not just the immediate fate of Milei's economic programme, but the trajectory of US-Argentine relations in an increasingly multipolar Latin America.