The market rearranges itself after the elections and the wallets of the investors They changed their strategy. With Sergio Massa and Javier Milei in the ballot but with a difference of 7 points between both, the average fell linked and dual dollar bondsand the contracts of future dollar in Matba – Rófex they decreased 7.3% for the month of April 2024, remaining below $1,000. The fact, however, that finally convinced us to make a 180-degree turn was the CCL crash of almost 23% for the week, which represented its worst weekly drop in at least 30 years.
This unexpected electoral scenario led us to think that the Minister of Economy and candidate has the enough air to reach the runoff while maintaining a managed exchange rate.
Having been in first place added to the recently announced “exporting dollar” that will provide greater containment to the financial dollar through greater supply, is the strategy that will allow us to continue with the planned plans: adjustment of the official dollar in November and the gradual return of the crawling peg.
“The market considerably lowered the expectation of devaluation and exchange rate run, at least for a time,” says a report prepared by Contexto Investment for Ambit. It is worth remembering that in the run-up to the elections, investors decided to cover themselves with tools tied to the dollar via CEDEARs, Argentine law corporate bonds, financial dollars and linked dollar bonds.
“A large part of the market that priced a devaluation of different magnitudes quickly migrated from assets tied to the official dollar, understanding that until the ballot the official dollar will remain in the $350 area, to obtain returns in a high inflationary process,” says Contexto.
And now?: the Linked Dollar strategy vs. CER in investor debate
According to him Lucas Decoud, Fixed Income Analyst of the IEB Group in dialogue with Ambitthe differential dollar for all exports “which ultimately is a devaluation with no correlation in the official dollar”, was “disturbing” for the future of the titles that adjust for this variable.
With respect to CER curve, this showed significant progress, especially in those securities with maturities from 2025, taking into account that inflation will continue to be high in the short term given the electoral incentives of the ruling party to continue with an expansive fiscal and monetary policy in the face of the runoff. Some CER securities with maturities in 2024 already operate with negative yields.
According to Decoud, during the next rounds we will probably continue to see demand for CER titles but “sooner rather than later, as we get closer to the runoff, the demand for coverage will appear again.”
On the other hand, he points out that with financial dollars falling and the implementation of the differential dollar and the BCRA intervening in the MEP, “the opportunity to carry with bonds in pesos It becomes very interesting.”
DL-CER: what happened to the Common Investment Funds
The FCI industry It was also impacted by the recalibration of expectations after the general election due to the correction in DL bonds and futures that made a dent in the performance of the funds.
According to a PPI reportthe DL and Corporate hedge funds that until Friday had accumulated increases in the month of 18% on average (and up to 25% depending on the strategy) and 15% respectively, cut this return between five and eight percentage points so far This week.
In contrast, theto CER coverage accelerated its good performance and added an average of 15.5% in the month – extending up to 18% if the strategy is based on long CER. Your reason, there is no doubt, takes refuge in the behavior of the curve of this adjustment.
Expectations: what the market expects for the runoff
In relation to the possible scenarios posed by this election, the victory of the ruling party for IEB would clear up “a lot of uncertainty for debt in pesos” considering it in the scenario “more constructive” pfor this type of assets.
“In the coming weeks it will be key to know the alliances and the different proposals of the candidates to determine the probability of winning that each one may have, this being one of the pmain drivers for Argentine bonds from now until the next elections,” says Lucas Decoud.
In the FCI industry, PPI points out that “a recovery is not ruled out” before the second round in the FCI Dollar Linked. Although, “the CER curve could recover – if the scenario of continuity of the ruling party and acceleration in the rate of inflation (above two monthly digits) materializes. Volatility will also be high“, they concluded.
Source: Ambito
