Sovereign dollar bonds started June in the green. Yesterday, the rebound was strengthened with increases of up to 6.7%. Given a combination of local and external factors, Argentine debt in dollars managed to deepen the incipient recovery that began in May. On the one hand, market expectations are that the United States Federal Reserve will maintain the reference rate unchanged at its next meeting, for the first time in a year, which gave rise to a more favorable global climate for assets. emerging. And, on the other hand, at the local level, a greater search for dollarization by investors and the recent news of the extension of the swap with China had a positive impact on local debt prices.
With yesterday’s rise, so far in June dollar titles have accumulated significant rebounds: the AE38 advances 10.2%; AL41, 8.8%; the GD35, 8.1%; the GD30, 5.9%; AL29, 5.2%; and the AL30, 4.8%, among others. This improvement caused the country risk to fall by around 6.5% to 2,388 basis points in the same period.
Juan Manuel Franco, chief economist at Grupo SBS, highlighted: “The rebound in bonds could be affected both by the expansion of the currency swap with China and by the expectation of renegotiation with the IMF and, within this framework, a certain margin for for the BCRA to intervene in the exchange market. All of this would generate some relief in terms of flows and clear up doubts about interest payments in July. In the medium term we are constructive regarding bonds in dollars at these parities, indicating that we see GD41 and GD35 as top picks. We also like the trade by legislation from GD30 to AL30 given a spread that has increased in recent days”.
On the other hand, there was external wind. Currently, the market assigns a 77% probability that the Fed will not change the interest rate at its next meeting. Despite the fact that the latest data revealed that the labor market remains solid, the agreement on the debt ceiling had a positive impact on expectations. According to Portfolio Personal Inversiones, “the Fed seems more inclined to maintain the policy rate in the next meeting; It is likely that the turbulence in the banking sector observed a few months ago has influenced him to signal a pause in his rate hike, seeking to avoid a possible deep recession in a particular economic sector (manufacturing sector) and try to reach a soft landing.” .
Along these lines, Lisandro Meroi, research analyst at TSA Bursátil, highlighted: “When one observes the movements in the curve of sovereign bonds in dollars, more precisely the global ones, a strong correlation to the good returns of global emerging fixed income. The iShares JP Morgan USD Emerging Markets Bond ETF (EMB), of which Globals make up a small portion, advanced 0.9% from May 24 through Friday June 2. In that same period, local sovereigns averaged returns of 1.5%. Thus, the momentum of assets worldwide seems to have “dragged” the debt securities of our country.
Moving forward, he stated that “a catalyst has not yet been found that allows a great revaluation of Argentine bonds.” And he added: “At the international level, the Fed does not seem to be assured of victory against inflation, a reason that could lead the entity to continue with the monetary adjustment, removing liquidity from risky assets. Beyond this question, the current hit parities will require rather idiosyncratic factors, related to the stabilization of the current macro situation and the different definitions regarding the economic program that the candidates who stand for the next elections may propose”.