Argentina’s dollar-nominated bonds and company stocks trading on Wall Street took a sharp tumble on Wednesday, after the Lower House voted to strike down President Javier Milei’s veto on a law increasing funding for people with disabilities. On the same day, rates for the securities-guaranteed loans skyrocketed amid market confusion over the administration’s monetary policy.

Dollar bonds suffered declines exceeding 2%, led by the Global 2041 (-2.6%), Bonar 2029 (-2.5%), and Bonar 2041 (-2.4%).

Argentine stocks traded on Wall Street through American Depositary Receipts (ADRs) also suffered losses, led by biotech company Bioceres (-8.5%), energy company Edenor (-5.7%), and communications and energy giants Telecom and YPF (-1.8% each).

“The deepening decline in bonds (the day had already started badly) after the veto was rejected was not because that law would upset the fiscal balance, but because it demonstrated Milei’s political weakness in Congress, which he had not had until now,” independent financial analyst Christian Buteler said in a post on X.

Meanwhile, the annual rates for securities-guaranteed loans in Argentina soared to 80% after plummeting on the previous day. On Tuesday, the rates jumped to 65% but closed at 2%.

Securities-guaranteed loans (cauciones in Spanish) are financial transactions in Argentine pesos with a pre-established interest rate, secured by short-term negotiable securities. At maturity, which ranges from one to 120 days, the borrower returns the principal and pays the accrued interest to the lender.

A broker who spoke on the condition of anonymity said that the volatility started in July, when the government decided to discontinue the Fiscal Liquidity Bills (LEFI, by their Spanish acronym), which had been created a year prior. The LEFIs were used to manage liquidity and set interest rates.

“Now, there is no reference,” the broker said. “The government expects rates to be defined by the market, but when they plummet, the Central Bank starts to carry out one-day repo operations (pases pasivos) with a rate that is determined by the day’s average rate plus two points.”

“There is an enormous inefficiency — central banks around the world have a reference rate scheme rather than monetary aggregates,” like the one Argentine administration expects to have, the market source added.