The Consumer Price Index (CPI) of 2.7% in Octoberas published by INDEC this Tuesday, consolidates the disinflation processsince after five months oscillating between 3.5% and 4.6%, it finally managed to break 3%. This change in the expectation of price increases implies a rearrangement of bond yields in pesos.
So, There are two phenomena that city analysts see: on the one hand, a drop in rates in the short term due to the lack of instruments offered by the Treasury in its tenders, and on the other, a greater slope in the curve due to a strong compression in the medium and long sections.
This is how they explained the market reaction from PPI after meeting the CPI data below 3% last month: “The rates of Lecaps compressed strongly (between 2.8% the shortest and 2.5%/2.6% the longest at the close of Tuesday) and then The BCRA has cut the monetary policy rate from 40% to 35% of TNAwhich took the crawling rate spread to its lowest levels since May.”
“Instruments in pesos are going through a process of generalized rate reductionsas a result of the Government not offering fixed rate instruments in its tenders. Without Lecaps in the primary market, “Banks are forced to look for them in the secondary market, which causes their prices to rise and their rates to fall.”he explained Juan Pedro MazzaFixed Income Strategist Cohenin his report.
So, so far in November, fixed rate instruments went from yielding TEM 3.2% to TEM 2.8%; those adjustable for inflation, from CER + 10.4% to CER + 7.6%; and the dollar linked, from devaluation + 6.4% to devaluation + 4.1%.
Mazza also assured that, to this daymarket prices imply an inflation of 2.2% for the last two months of 2024somewhat below their estimates that place it at 2.6%. “This indicates that, under our projections, “CER instruments would offer a slightly higher performance than Lecaps”he detailed.
What strategy to take in this context
Since your last report CMA Research DepartmentIn terms of pesos, they assured that it is a time of uncertainty given the different scenarios for the release of the stocks, which is why they consider “the best alternative is to reduce the duration until we have greater precision about the path to follow.”
For short-term liquidity Lecapsespecially the middle part of the curve, “may be of interest” and in the long part of the fixed rate curve, “The Boncaps continue to have a certain upside despite their outperformance in recent weeks.”
Source: Ambito
