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Debt maturities in dollars put pressure in June-July and the market looks at the swap factor

Debt maturities in dollars put pressure in June-July and the market looks at the swap factor

The exchange and financial tensions of these last few days reflect the various questions that fly over the operators’ tables. Added to the difficulties that the Government is showing at the political level is the struggle over the level of the official exchange rate and the growing doubts about the limits faced by the economic team’s plans on the fiscal and currency fronts. The latter gained prominence this week. The thing is that, at a time when the Central Bank slows down its dollar purchases, The months with the greatest burden of debt maturities in foreign currency beginwhich could increase significantly as there is still no agreement to refinance the swap with China.

The June and July two-month period is already heavy: according to data from the Congressional Budget Office (CPO), between the payment to the bondholders and the expirations with the International Monetary Fund and other organizations multilateral and bilateral, add US$3,902 million. The first amortization installment of the loan will also be based on this. BOPREAL (issued by the BCRA) for US$167 million, which expires on July 31, and some other provincial commitments.

But the demand for foreign currency could take a leap due to the flaws in the relationship with China and put strong pressure on a still meager level of reserves. Although the Government affirms that they continue negotiating, in official offices there is a growing presumption that at least part of the large swap maturities will have to be met.

Between June and July the equivalent in yuan of about US$4.9 billion expires of the exchange of currencies with the Asian Giant. This is a section of the swap that was activated during the previous administration to alleviate the moment of severe currency shortage imposed by the drought. If it had to be canceled in its entirety, the maturities for the two-month period would escalate to more than US$8.8 billion.

“This would imply a hard blow to net reserves, which we estimate to be -US$2.3 billion under the IMF methodology,” said a recent report from Portfolio Personal Inversiones (PPI). Salvador Vitelli, head of research at Romano Group, for his part, calculated that net reserves today are positive at US$1,350 million and negative at US$950 million if the BOPREAL maturities 12 months ahead are subtracted.

Specifically, although the possible payment of the swap would not have a direct impact on the Bookings net since the liabilities are not part of them, they are will impact the BCRA’s currency liquidity because dollars that the entity has today but that are not computed for the net calculation will be used. And to that we must add the outflow of reserves for the rest of the maturities.

Debt: details of maturities and market doubts

According to the OPC, public securities for US$4 million and loans with multilateral and bilateral organizations for US$264 million expire in June (it remains to be seen if these entities send new disbursements in this period). In July, US$2,561 million of the 2020 exchange bonds expire, US$642 million corresponding to the debt with the IMF (while the Government waits for the Board of Directors to approve the eighth review and issue US$900 million) and US$900 million s431 million credits from other organizations.

The truth is that the market began to closely follow this aspect, taking into account that In recent days the BCRA slowed down the pace of currency purchases in the official market in the face of a liquidation of agrodollars that continues at a moderate pace. This Wednesday, in fact, he sold reservations for the third time on eight wheels.

In the minds of officials and operators, the recovery of reserves is necessary so that at some point the Government can effectively advance in opening the stocks. Days ago, Luis Caputo acknowledged that there is still a need to reach a level that allows it to be opened without problems. It is also true for any possibility of regaining access to international credit markets, as the economic team intends for a 2025 in which maturities escalate. The sharp fall in bonds and the rise in country risk to more than 1,500 basis points seem to reflect, in part, the uncertainty in this regard.

A report from the consulting firm Vectorial indicated that the current purchasing performance of the Central “generates doubts about how soon the reserve accumulation cycle will begin to change that the government has been showing since the beginning of its mandate.” And he added: “Especially considering the demand for dollars that, in the next semester, requires the full reestablishment of the payment of imports, the cancellation of the Chinese swap (which the Executive has so far not been able to renew), the beginning of the payment of the BOPREAL and the commitments of both sovereign bonds and international organizations.”

In addition, Vectorial pointed out that limits also appear on the fiscal level. “May is likely to be the last month where we see primary and financial surpluses, largely thanks to the effect of seasonality,” he considered.

The market was too optimisticthinking that this will be fixed quickly. Now you are asking yourself questions that you didn’t ask before.. “You see that the weight of the disarmament of the passes ends up in short Treasury debt, that it is difficult to add reserves, that inflation is bottoming out, that there are political tensions, and then the questions appear,” summarized a seasoned economist from the City.

Source: Ambito

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