NEW YORK (Reuters) - Argentina’s notoriously shaky stock and bond markets, which have been hit by years of economic crises, are rocketing again. The country’s S&P Merval stock index is up almost 30% in dollar terms this year, one of the best performing stock markets in the world, with most of those gains since a nadir in March-April. Sovereign bond prices, rooted in distressed territory for years, have jumped over the same period. The sharp rise has picked up pace in recent weeks, driven by positive noises around $45 billion debt talks with the International Monetary Fund, local bond revamps bearing fruit and investors eyeing positive outcomes from midterm elections. Analysts say the outlook for investors in South America’s second-largest economy is starting to clear after depleted foreign reserves have started to trickle back and COVID-19 cases are dropping steadily allowing restrictions to be eased. The important Buenos Aires province sealed a $7 billion debt revamp this week after a sovereign restructuring last year. “The post-restructuring payment outlook looks clear in years ahead, the economy is recovering, the central bank seems to have stabilized the exchange rate and slowly recover reserves,” said Sabrina Corujo at consultancy Portfolio Personal Inversiones. “We are clearly not in the best of scenarios - or close to it - but we’re not under the shadow of default.” The stock index hit a record high this week before taking a breather on Tuesday and is up some 7% in the last week. The Argentine stock market, with a market capitalization of $26 billion, is dwarfed by larger peers in Brazil and Mexico. Argentina stocks rocket The over-the-counter bond market is up on average 5.7% in the last seven trading sessions. A 2030 bond and 2038 bond are up 10% and 17% since lows in March. And upsides remain despite the country’s well-known perils. “Investors and trading volumes have increased, with abrupt increases in the short term. Argentine assets are still undervalued, but the risks are many,” said one banking analyst. Argentina has strict capital controls in place that limit access to dollars, which has put a dampener on corporate issuance of foreign debt, and the government needs to revive the economy to be able to meet future debt payments. Aldo Abram, economist at consultancy Libertad y Progreso, said the Buenos Aires debt deal after over a year of tense talks was a “positive” signal, while the IMF releasing some $4.3 billion in Special Drawing Rights (SDR) to the country helped relieve repayment worries this year. “Now we have the payments (to the IMF) covered,” he said. Positive murmurs about talks making headway over a new IMF deal have helped too, while external factors, including a more dovish stance from the U.S. Federal Reserve, have propped up emerging markets more widely. Argentina bond bounce Others said that upcoming mid-term elections in November were likely to dent the Peronist coalition that has taken a popularity hit during the pandemic, potentially tempering the more radical wing of the ruling party. “The result will be crucial to forcing consensus that will allow post-election strategies to address fiscal and monetary issues, as well as stabilizing divergent currency exchange rates,” said Gustavo Ber from Estudio Ber. “It’s also key to an agreement with the IMF to refinance payments.” Reporting by Hernan Nessi; Additional reporting by Jorge Otaola; Editing by Nicolas Misculin, Adam Jourdan and Alistair Bell Our Standards: The Thomson Reuters Trust Principles.