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Tuesday, March 28, 2023

The swap helps, but it does not completely eliminate the risk of shocks in this election year

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In the end, we will have an exchange and with it the clouds of the maturities of the public debt in pesos seem to be clearing, at least until PASO. But is it so? In the first place, it cannot be ignored that this is a good sign that involves, in part, maturities for almost $8 trillion. Of course, the percentage obtained will also be a fact to take into account.

In the end habemus exchange and with it the dark clouds of the maturities of the public debt in pesos seem to clear, at least until PASO. But is it so? In the first place, it cannot be ignored that this is a good sign that involves, in part, maturities for almost $8 trillion. of course too the percentage obtained will be a fact to take into account. Because contemplating that approximately half of the debt eligible for the swap is in the hands of the public sector, there are still close to $4 trillion left in the balance. Of that total, some $1.6 trillion are in the hands of private banks, close to $800,000 million in Common Investment Funds (FCI) and less than half a trillion pesos among insurers.

It is worth noting that foreign funds would have no more than 2%, so they are not relevant in this move by the team led by Massa and Rubinstein, although everything adds up in the end. Hence, the agreement was signed, mainly, with the chambers that bring together local and foreign private banks, public banks, which appeared as faithful defenders of the initiative in the face of criticism from the opposition. Although for obvious reasons they also had to commit the representative entities of the FCI industry and the insurance sector. So, if all the bonds held by public organizations and entities were to enter, it remains to be seen how much will enter from these holders. Even more so, if 100% adherence to the swap were reached like this and everything does not disappear the risk of a debt crisis. How is this?

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Analysts estimate, a priori, that between $1.5 and $2.5 trillion could be left out of the swap. In this regard, it is worth noting that the operation was not designed by adherence but is tendered by price, so it is difficult in principle to know what rate levels the Treasury is willing to validate in order to achieve a high exchange percentage. But being optimistic and assuming that the swap achieves total adherence, 100%, all the dark clouds ahead will not disappear either. Because although there would no longer be public titles in pesos that mature between March and June of this year, which simply implies tearing down the famous expiration wall, it must be remembered that this is an electoral hinge year. So there is nothing to ensure that, in the middle of the pre-election campaign, or after the next key date, June 24, when the lists for the Primary (PASO) are already official at the national level, that is, when lists are closed and those who will be pre-candidates or who are going to compete or not are defined, that some event emerges that triggers more uncertainty and induces the holders of the new bonds, which will mature in 2024 and 2025, to sell them in the secondary market .

In this sense, recent history is instructive and we do not have to go too far, it is enough to remember what happened in the middle of last year, in the midst of the Guzmán-Batakis farce and the liquidation of positions in sovereign bonds in pesos. Today, analysts look at not only the STEP but the post-STEP and the first round of October as milestones to take into account to glimpse how the bondholders will behave. Of course, if any of this happens, the Government can turn to the BCRA, which simply implies more issuance. Or, let the market adjust, with the consequent effect of giving up placing new debt. The truth is that in both options the final word will be the CCL dollar, that is, the gap.

All this being said, no less important will be to see how the opposition will react to this swap operation since it had been brandishing the drum for weeks warning about the debt bomb and other criticisms about the management of the public debt in pesos. Because this, without a doubt, will have an influence, especially when the competitors of the final stretch of October become known. Either some kind of “patriotic” agreement between the government and its probable successors is taking shape, and the decibels of these electoral questionings will go down, or everything will be at the expense of what one or the other candidate says and how this affects the expectations of the bondholders. . Of course, we will also have to see what the government does in fiscal matters this electoral year.

Source: Ambito

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