In front of a inflation which is around 2%, a dollar even with stocks exchange and a gap of 15%, there are those who wonder if there is still room to do carry trade. In this regard from GMA Capital They set out to analyze the current state of the situation and provide some projections for 2025.
“In the face of good inflation datathe BCRA could have in mind a reduction in the monetary policy rate. The thing is that currently the LEFI rate is equal to 32% TNA, which implies a differential of 0.7% monthly against the crawl. Given a dollar moving at 1%, the spread would go to 1.7%,” they explained.
Regarding the carry trade, so profitable during 2025, this consulting firm warned that “the strategy is subject to old and new risks.”
For GMA Capital, it is important to highlight that for 13 months the exchange rate has risen 2% monthly by official decision but that “A reduction in this rate to 1% monthly would be the precursor to an enormous step towards the eventual exit from the stocks this year.”
In this framework, in the last Market Expectations Survey (REM) analysts moderated their devaluation projections. Thus, after indicating an official dollar of $1,139.5 for June in the previous month’s survey, they now predict that it would equal $1,112which marks a crawl of 1.2% monthly that could stretch until the end of the year.
Regarding dollar futures since November that The implicit monthly devaluation starting in February is, almost without exception, below 2%.
“However, Exchange controls hinder the possibilities of arbitration, preventing the peso curve (Lecap) from aligning with the futures curve. For this reason, forward rates in futures below 2% may be due, at least partially, to expectations about a decrease in the crawl,” they explained.
Dollar vs rate: what to expect in 2025
For this private report, given good inflation data, The BCRA could have in mind a reduction in the monetary policy rate. The thing is that currently the LEFI rate is equal to 32% TNA, which implies a differential of 0.7% monthly against the crawl. Given a dollar moving at 1%, the spread would go to 1.7%, they noted.
“This situation would embody an increase in the implicit rate in dollars, bringing it to a level more similar to that seen between May and October of last year. Thus, there would seem to be room to reduce the rate in pesos, so as not to stifle the recovery of the economy. , not encourage a broad carry trade, but without dismantling the scheme that incentivizes investors placed in pesos“they explained.
And they added: “Investors are willing to secure a lower long rate than in sight in the short tranche. This leads to forward rates at the end of January, that is, those implicit in the curve, showing a shift in it. Without a doubt, in the market’s mind, the disinflation process will continue.”
Is there a place for carry trade?
For GMA Capital, The first thing to recognize is that a rate compression would allow profits to be capitalized from instruments in pesos with a certain duration.as are the letters on the long stretch of the Lecaps curve. However, according to his projections, The level of the CCL appears to matter more in determining the dollar outcome of the investment.
For this analysis they maintain that, with a “liqui cash” stable at $1,200, profits in hard currency in 6 months can reach close to 20% in “a scenario in which inflation expectations collapse.”
It should be noted that, with a crawl of 1% starting in February, this scenario would imply a decline in the gap to 9%. “Furthermore, it would represent a continuation in the exchange rate appreciation process, bringing the financial dollar to a level similar to the current official exchange rate in real terms,” they added..
Among the risks, what happened in the last month stood out, in which the overheating of the gap led to the carry with Badlar it will mark -4.5% in dollars.
Therefore, they emphasize that “Although there are possibilities of generating attractive returns in dollars by doing carrythe strategy seems to show greater risks today than in the recent past. “Investors should take this balance into account when deciding how to position themselves heading into an election year.”
Additionally, they highlighted that there could be not one but several disruptive events. At the local level, they highlighted the exit of the stocks. But in international terms, they highlighted that there is a platoon of threats: the rise in interest rates on long-term bonds, the strength of the dollar and the impact of this cocktail on commodities and emerging markets.
“This is a discussion that was distant when Argentina had a country risk of 2,000 bps, but that the notable compression up to 560 bps today became transcendental. Even in times of stocks, 2025 will be a year with greater permeability and exposure to what happens out of our pampas,” they closed.
Source: Ambito
