The Public Debt Management Unit (UGD) of the Ministry of Economy and Finance (MEF) reported that the result of this Tuesday’s tender for the Treasury Note in Indexed Units (UI) Series 31 received an award for 326 million pesosjust over a quarter of the amount tendered.
The government’s offer had been 200 million IUbut finally the placement was by 57.4 million IU. The State has, within its powers, to end up awarding up to twice the amount auctioned. Still, he placed only one 28.7% of what was auctioned. Meanwhile, 326 million pesos were issued which, at today’s value, are about $8.3 millionwith a cut rate of 2.99%.
This is an unusual fact, in most of the last tenders, the awards doubled or tripled what was offered. In fact, this was the first time in the year that it was awarded so far below what was proposed by the Executive Branch. The only time was in the first of 2023, the January 17 and for this same Series 31, where 200 million UI were offered and just below 195.7 million UI was awarded.
The Indexed Units are updated based on inflation evolution, which in recent months the government has managed to slow down with its monetary policy of high interest rates at the Central Bank of Uruguay (BCU). The latest data for February marked a further drop in the Consumer Price Index (CPI)which registered a 7.55% year-on-year.
The question remains whether or not this represents a lack of attractiveness in instruments of this type precisely because of the downward trend in price changes.
The conditions of the Treasury Note in UI to 2029
The closing of the tender was at 2:30 p.m. today –Montevideo time– and the settlement, meanwhile, will be tomorrow. Among the conditions of this bond, the UGD established a 3.25% annual coupon. In turn, the interest payment be biannualevery July 18 and January 18, until January 18, 2029, expiration date, with date of amortization back then.
All local investors authorized by the Central Bank of Uruguay (BCU) were authorized to present their offers. Non-resident investors, for their part, did so through a local bank or broker, or through Global Depositary Notes (negotiable at Euroclear, Clearstream and DTC).
The minimum amount of each offer established was PU 100,000, in multiples of UP 10,000. As usual, and as defined by the UGD, the tender was structured as an auction of only pricewhich means that all accepted offers were “awarded at the same price.”
In turn, Treasury Notes were accepted as a means of payment 26 series (UI), 27 series (UI), Series 13 (UI) and Series 1 (UP).
The next tender of a Treasury Note will be next week, the Tuesday March 21where the MEF will auction 1,100 million Pension Units (UP) –about 1,587 million pesos– in Series 3, with a 2.2% coupon and due on May 13, 2040.