BUENOS AIRES (Reuters) -Argentina's closely-watched country risk index fell sharply on Tuesday to its lowest level since May 2018, according to traders, reflecting investor confidence in the South American country's assets.

The index, which shows the yield spread on bonds versus comparable U.S. debt and is a reflection of how investors view the country's debt, fell more than 100 basis points to a level of 454.

Argentina's assets have become more attractive for investors as its strained economy emerges from a painful recession and public finances stabilize due to President Javier Milei's tough austerity measures and cost-cutting.

The country's trade balance, which notched its twelfth-consecutive surplus in November, is among the reasons for the drop in country risk, trading group ABC told Reuters.

The risk level has also fallen in part because of improved foreign reserves, a repurchase agreement loan of $1 billion with five foreign banks and expectations of a new debt agreement with the International Monetary Fund, ABC said.