The banks already have all the bonds they received for the debt swap in pesos covered with the liquidity insurance of the Central Bank, called put..
According to an estimate by Adcap Grupo Financiero, the regulatory entity of the financial system would have already sold liquidity options for the equivalent of 23.3% of the new titles delivered, which expire in 2024 and 2025.
“They would have already covered 100% of what they received,” they told Ámbito at the fund manager. The greatest demand for coverage was for the shorter dual bonds that expire in February next year, with 31% allocation, the administrator’s analysts estimated.
What can be interpreted from this is that The banks expect economic measures for the first months of the next government that would force them to make use of liquidity insurance, which is technically a put option under certain conditions. These are the market asking price plus 30 basis points. The 2024 duals would be the first on the list to get rid of them.
Beyond this, after the exchange, they maintain in Adcap that “with the market on the defensive and very short-term, the issue is going to be what is issued in the next tender to roll up the debt.” The next wall of maturities for the Government will be in July, when there are maturities for the equivalent of US$14.6 billion.
The put, for some economists, actually functions as a kind of insurance against a future adjustment, that the next government will inevitably have to do, regardless of the orientation of the political coalition that wins this year’s elections.
Given the conditions of high distrust of investors in the political system as a whole, it seems that the only way to extend the terms of the debt in pesos was to offer full guarantees to the banks that the bonds they received will not lose value for no reason.
Martín Calveira, an economist at the IAE, the business school of the Austral University, told Ámbito that “there will surely be an adjustment understood as ordering the nominality of the economy.”
Calveira maintains that in this context, while the next government tries to eliminate the gap through a devaluation, which will generate an increase in inflation, “a small group will be covered.”
In other words, the financial operation will generate what he considers “a regressive effect of income distribution.” For the IAE economist, society as a whole will have to bear perhaps a devaluation of 20% to 30% or a loss of purchasing power of 5%, while the banks will remain on the sidelines.
“The option to this exchange could have been a political agreement to offer longer-term bonds between the next two presidential terms, perhaps starting in 2026 or 2027,” he explained.
If what the economists of Juntos por el Cambio could be thinking is to try to unify the exchange rates as soon as possible, and then get out of the stocks, the exchange generates a serious headache. If the mass of Leliqs from the Central Bank is added to this, it is estimated that there would be some $20 trillion of debt in pesos that could try to become dollarized if a framework of confidence in the local economy is not recreated.
Source: Ambito
