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Sunday, November 27, 2022

The Government finalizes a debt exchange offer for $1.7 trillion for next week

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The Government would have solved part of the problem before beginning the operation. It is estimated that 60% of the bills and bonds in pesos that expire until the end of the year are in the hands of organizations and agencies of the public sector itself, which guarantees the acceptance formulated by the Palacio de Hacienda.

Due to the exchange that took place in August, which postponed maturities until October, last month the level of commitments that the Treasury had to meet was low and was mostly in private hands. But still he couldn’t achieve a great placement. The refinancing rate according to private estimates was 104%the lowest level of the year.

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On the other hand, the level of interest rates that the Ministry of Economy is having to pay to obtain financing is increasingly higher. The problem is the following: there is a strong accumulation of maturities with indexed debt, both for inflation (CER) and for dual or dollar-linked bonds. It is estimated that between July and September 2023 the level of commitments reaches 3.5% of GDP. If there were any disruptive event within the framework of the electoral year, it could severely impact public accounts.

Hence, the strategy of the Ministry of Finance is try to move towards fixed-rate bills, the Ledes. In that case, a letter of that type due in February went from paying in the first week of last month 114% effective annual to 117% in the second tender. Since the last placement made by the former minister Martín Guzmán the cost rose 45 points and since the last one by Silvina Batakis, 26 points. As the level of net financing that the Palacio de Hacienda achieved in October was low, with an estimated fiscal deficit of some $180,000 million, there was no other choice but to start using the mattress of pesos that the Treasury had been accumulating until now. Equilibra estimates that $880,000 million are deposited in the Central Bank.

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For now, in the first call on Monday, November 7, it is expected that the Ministry of Finance will finish defining the offer for the conversion that will take place a couple of days later.. The market, strictly speaking, is demanding instruments by 2023 and is reluctant to pass the 2024 barrier. There is still mistrust in relation to a change of political sign resulting in a new restructuring. The instruments offered in the August swap were dual bonds, which cover holders both against devaluation and against inflation. Although the rate they paid was low, banks were allowed to use them for reserves with the Central Bank, which generated a good reception.

ANDn the next few hours, the Ministry of Economy will begin to define the details of the operation after consultations with references from the markets and banks. The main question is the term of the titles that it will put on the table.

Source: Ambito

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