In a day of panic and global uncertainty due to the crisis that caused the fall of Silicon Valley Bank (SVB) in the US, dollar bonds and ADRs from Argentine companies suffered another strong punishment yesterday, before which the country risk rose to a maximum in several months.
With a very high aversion to risk assets, due to the repercussions that the bankruptcy of the SVB could have on the financial system, the stress indicators of the financial markets moved with strong volatility, which made investors reconsider the outlook for rates interest rates in the United States, triggering the biggest bond avalanche since at least 2008. Startup-focused bank SVB last week became the biggest bank to fail since the 2008 financial crisis, sending ripples shock to world markets. For this reason, the US president, Joe Biden, came out to bring peace of mind to the markets: he said that he would commit to doing everything necessary in the face of the banking crisis, whose bankruptcy of SVB forced the regulators to intervene with emergency measures (see more information on page 16).
The announcement that the Fed and the US Treasury made jointly over the weekend had not been enough, when they had promised that SVB depositors would have access to all of their deposits, (without shareholder protection and certain bondholders).
Under this scenario, bonds denominated in dollars registered falls of up to more than 7% in the Buenos Aires stock market: Global 2038 collapsed 7.1%, Global 2046, 3.7%, and Bonar 2041, 1. 8% In New York, Argentine titles fell to 5.2% (Bonar 2029).
Indeed, the Argentine country-risk measured by the JP Morgan bank climbed 1.8% to 2,322 basis points, after touching 2,444 units at the market opening, a level not seen since last November.
“The collapse of the banks Silvergate Capital (crypto bank) and Silicon Valley Bank hit risk assets, of which the Globals are a part,” they pointed out from StoneX.
After the US authorities intervened to limit the consequences of the sudden failure of Silicon Valley Bank, expectations that the Federal Reserve would be aggressive with monetary policy to curb inflation sank in the market.
“The potential change of direction of the Fed in monetary policy could imply a slight recovery for Argentine bonds,” estimated Portfolio Personal Inversiones (PPI). “On the one hand, a decrease in the tightening of the interest rate could cause investors, in search of higher returns, to include riskier titles in their portfolios -of high ‘beta’- like the Argentine ones”, he added.
“For now it was not the end of the financial system, nor a new 2008. In fact, I see much more green than expected. And that they made a decision that leaves no one happy, because they rescued depositors not covered by insurance but not the bank, its shareholders and creditors”, evaluated the economist from the consultancy Ledesma, Gabriel Caamaño.
S&P Merval and ADRs
Meanwhile, in the equity segment, BYMA’s leading S&P Merval Index sank 4.7% to 225,227.52, after falling 3.8% last week.
The global collapse also conditioned the performance of the papers of Argentine companies, which closed with falls of up to 7.1%. Among the most pronounced decreases of the day, YPF (-7%) stood out; Take off (-5.4%); BBVA bank (-5%); IRSA (-4.9%); Transportadora Gas del Sur (-4.3%); and Vista (-3.8%).
Global financial uncertainty opens a new storm front for the Argentine economy as fears of a retraction that will affect the country’s already weak exports will intensify.
On Wall Street, it was a very volatile day. After falling to almost 2%, Wall Street ended unevenly, but resisted the fear caused by bank failures in recent days in the United States, while European stock markets closed with sharp falls due to fears of contagion in the sector. The Dow Jones lost 0.3%, the Nasdaq gained 0.5% and the S&P 500 lost 0.2%.
Wall Street opened in red due to the crisis hitting the US banking sector, to the point of leading the authorities to guarantee all customer deposits on Sunday. But then the world’s largest stock market recovered ground and ended mixed and quite close to equilibrium, thanks in part to “sectors sensitive to interest rates, which rose due to the fall in yields on bonds” from the Treasury, he explained in a note from analysis Edward Moya of Oanda.
“Those who continue to go through the storm are the regional banks, where depositors rush to withdraw their deposits (today the IAT etf lost 15%),” they commented from SBS. On the other hand, the 2-year US bond rate fell 60 basis points to 3.99%, while the 10-year rate fell 15 bp to 3.55%.