The fact is that, in this adventure that represents the financial front for the coming weeks, the Government has located a point in which it must repair. On June 28, the Treasury will face a debt maturity of almost $600,000 million, a real challenge that looks more reckless from the recent drop in the price (and demand) of assets in pesos adjusted by CER (inflation).
Regardless of the explanations given or the hypotheses considered, Minister Guzmán prepares a clamp operation. Although the first step consisted last week in a increase in the interest rate by the Central Bank by 300 basis pointsthe second part (beyond the conversations of the brand new crisis table also made up of the brand new minister Daniel Scioli and the head of the Central Miguel Pesce) has a direct relationship with the potential applicants for the bonds that Guzmán must renew at the end of this month.
There is concern. An adverse signal could once again lead to a strong demand for dollars in the stock market. That’s why Guzmán summoned the two main banking chambers to debate -the verb falls short- the conditions of what will be the next debt auctions that the Treasury needs.
The goal, ultimately, is that those pesos serve the Treasury to finance its deficit and comply with the commitment with the International Monetary Fund (IMF).
What will be the axis of the conversation? According to a senior source, It is likely that the Government will insist on its strategy of placing debt securities adjusted by the CER index with entitiesalthough with modifications that have already been hinted at in recent days.
As it was told, the Treasury placed $ 28,000 million last week, nothing compared to what it will have to finance at the end of June. In the backpack, until now, the applied strategies seem to have worked: the Government accumulates funding for $658,311 million so far this year, with a roll over rate of over 120%. But times have changed.
Strictly speaking, in the last tender on Tuesday prior to the rate hike by the BCRA, Guzmán himself had to raise the rate and shorten the term of the instruments placed between institutional investors despite the tiny amount that was the object of the tender.
It goes without saying that even President Alberto Fernández is attentive to what will happen. The president plans to participate in the next G7 summit in Germany, but he met with Guzmán in the last few hours to catch up on the preparations being made by the minister. He doesn’t want news regarding the dollar because of the impact this has on inflation.
Next Wednesday then Guzmán will meet with the Association of Argentine Banks (ADEBA, local capital entities) and the next day, Thursday, it will do so with the Association of Banks of Argentina (ABA, those with foreign capital). The main popes of both chambers have some comments to make to the Government.
But the government will also surely be able to outline its fear before the bankers: of not obtaining funding in the next tenders, the minister Guzmán must ask the Central Bank for greater power in the monetary issue (to finance expenses). If that happens, other variables are likely to start moving deeper. That is why it is also not ruled out that the Government talks with mutual funds and insurers.
Although they are debt buyers more aligned with the needs of the Government, they will ask for some regulatory changes to accommodate themselves to the new scenario.
The Central Bank helps. Last Thursday, it ordered a relevant increase of 300 basis points in the annual nominal interest rate of the Liquidity Letters (Leliq) at 28 days, which thus went from 49% to 52% annual nominal. On the other hand, it decided that the guaranteed yields for fixed terms of human persons should be increased by 500 basic points, from 48% to 53% annual nominal.
But the most relevant signal is that for the rest of the fixed terms it goes from 46% to 50% annual nominal. This applies to companies, so the spread between Leliq and the rate paid by retail fixed terms will go from +1% to a differential of -1%. Another scenario applies to the rest, which only goes from a differential of +3% to one of +2%, always in favor of the Leliq.
That BCRA decision is explained by the need for a greater incentive for banks to accept the investment offered by the Treasury from now on, based on the regulatory margin that allows them to integrate more reserve requirements with government debt.
According to sources, it is, indirectly, funding against the liquidity of the banks (Which some say could generate further expansion of the monetary base. For the orthodox, this could push inflation even more. Although in the Government, heterodoxy also has its followers.
Source: Ambito
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