The dismantling of sovereign bonds in pesos it kicked off last week and pushed bond yields and inflation-indexed bills above 10% real. This complicated the Government’s financing strategy (agreed with the IMF) and woke up to financial dollars, which have already accumulated a rise of 13% so far this month after remaining relatively calm since the end of January. It is that part of the pesos rescued from the mutual funds that invest in these and other public securities went to demand cash with liquidation and MEP dollar, although another part migrated to UVA fixed terms.
In different official offices they coincided in pointing to the versions of reprofiling encouraged by some economists from Together for Change in meetings with investors (later denied by former officials) as one of the factors that triggered the disarming of positions in the CER titles, which until now they had represented the main source of funding for the Treasury. As part of the debates in the economic team, some officials considered that another factor was that these titles came to trade at negative real rates close to 10%.
The debt in pesos is key for the current government and, for this reason, Martín Guzmán reaffirmed these days that he would “never” default italluding to the unprecedented reprofiling carried out by the Mauricio Macri administration in 2019. It is that, among other things, it is the main way that the economic program foresees to meet the goal agreed with the Fund of reducing the monetary issue to 1% of the GDP this year.
“Now we are not going to run from the market,” commented sources from the economic team, in relation to the fact that the Government plans to sustain the intervention to put prices and yields back on track. How far will they try to push the CER curve? It’s not clear yet. The current level is not sustainable for the Treasury to be able to finance itself, but the sources consulted agreed that the indexed debt rate should have a positive sign in real terms.
A first sample of how much impact this cimbronazo will be seen this Tuesday in the first tender in June to be held by the Ministry of Finance, which captures the attention of the market. With few maturities this week, it will be a small placement (it will go out looking for $14,000 million expandable). For now, there will be a reduction in the issuance terms: Martín Guzmán’s team offers fixed-rate bills with a duration of two months and indexed bills with a term of four months. The focus of attention will be on the yields that validate Financebut it is discounted that there will be a rise with respect to previous operations.
The next step will come on Thursday. That day the BCRA board would define a new rate hike as a reaction signal to the latest market movements, according to what this newspaper learned. So far this year, the 28-day Leliq rate, the reference for the entire financial system, has risen five times: it went from 38% annual nominal rate to the current 49%, which in effective terms represents a yield of 61.77 %. The agreement with the IMF sets out the commitment to move towards positive real rates.
The new level will be defined, on the one hand, based on the inflation data for May that the Indec will report on Tuesday (it is expected to be around 5%) and, on the other, based on what happens with the tender for Finance. It is that the Central and Economy calibrate the movements so that the rate offered by the Treasury is always higher than the monetary policy rate, with the aim of stimulating banks and other investors to finance the treasury. Pesce, in fact, had been fighting for a slightly higher increase in public debt yields, while Guzmán was seeking more limited increases.
Source: Ambito
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