In the first tender in May, the Ministry of Finance (which leads Raphael Brigo Y Ramiro Tosi) had managed to attract net financing of $66,000 million. This surplus allowed the portfolio to reach more comfortable to face maturities for $166,340 million until the end of May. However, the fact that in Friday’s placement Finance obtained less than the requested amount caused a reduction in the monthly net funding, which has an impact on the monetary goal agreed with the IMF.
The goals
Treasury tenders are key to comply with what was agreed with the international organization. The program indicates that the Government must obtain financing in the local market for 2% of GDP this year, and reduce the monetary issue to 1% of GDP. Therefore, it is expected that, in each tender, Finance will achieve a 130% roll over so as not to put pressure on the monetary goal, according to private calculations.
In the first five months of the year, the Treasury accumulated extra financing for $629,528 million, which implies a roll over of 122%. Likewise, Finance was able to face a total of $920,020 million in maturities in May, the most demanding amount so far this year.
However, the difficulty that Finance faces is in the face of market preferences, which will condition the Government’s strategy in future financing searches in the coming months, since this tender showed a continuity in the appetite for inflation-indexed securities. 64% of the awarded amount was in CER-adjustable instruments, 30% at a fixed rate and the remaining 6% at a variable rate. Likewise, of the total financing obtained, 33% corresponded to securities maturing in 2022, 58% maturing in 2023, 4% to the instrument maturing in 2024 and 5% to 2025.
The market asks for CER
Paul Repetto, Head of Research at Aurum Securities, He pointed out that “the result was poor” because the titles offered were not attractive to the market. “Seeing the instruments that were tendered, we presumed that the tender was not going to be good and it definitely happened. Today, CERs are the most demanded by the market, and while the Treasury tries to extend the terms of this type of instrument, the market is not willing to extend the term and May 2023 is already perceived as too long. And although they concentrated the greatest demand, it was not robust enough for the result to turn out well either.”
Stephen Gette, economist in Cohen Financial Allies, agreed in the analysis: “Inflation sailing above 5% per month, added to the fears generated by the payment of the indexed debt for 2024, leads investors to only seek coverage in short-term CER instruments. Every time the Treasury does not offer a wide variety of these instruments, as in the case of the Lecer basket, the financing of the bids becomes complicated. Therefore, in order to meet its objective, the monetary entity must validate rates above those that operate in the market”.
In April, Finance sought to reduce the amount offered of indexed instruments, following the advice of the IMF, and for this reason it achieved a 90% roll over. This difficulty set off alarms, as it caused BCRA assistance to the Treasury to speed up in the first weeks of May, putting even more pressure on the monetary target.
challenges
On this point, gette He added: “For the coming months, it is estimated that the refinancing rate should be around 130% so as not to compromise the goals agreed with the Fund (2.2% of GDP). Above all, if we take into account that the issuance margin for the remainder of the quarter is about $58,000 million against $178,000 million so far in May.
For his part, Repetto pointed out that “regardless of the outcome of the tenders, I have doubts that the goals agreed with the IMF can be met. Between the poor bidding and the increase in spending, the emission goal is complicated; perhaps if they achieved a 150% roll over in the June tenders, it could be fulfilled”. In this sense, he opened up the possibility of an improvement since “in June, maturities are concentrated at the end of the month, so in the next tender on June 14 there is not a large amount of maturities close that could compromise the tender, so if you get a good volume they can be a bit looser and improve the level of placement”.
Source: Ambito
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