What is said at the tables: the dollar after October, the new “curlers” with the rates, while everyone takes the “Ozempic” of the Central Bank

Picardías and “Rulos” with interest rates

Innumerable maneuvers are being commented under the empire of high rates in pesos, the indomitable dollar that remains handcuffed by the economic team below the band’s roof, and the confusing monetary policy. But not all were private gadgets, there were also, apparently, Official mischief. An old “Collero” pointed to a group of pairs the tremendous record of the volume operated “T+1” in Lecap and Boncap of more than $ 1.6 billion per day exceeding the maximum of mid -July of $ 1.3 billion, with a clear protagonist: the “S10N5”. It is a letter of the capitalizable treasure in pesos (LECAP) that concentrated 43% of the total negotiated volume. Apparently in the last wheel, after a full “Sell off” in the peso curve before noon and after the closure of the futures market, purchase orders appeared with strong amounts in marginal papers of the curve, such as the “S10N5”. This movement did not go unnoticed and suspicions about official actions were evident. For some, debt repurchase was a positive signal, for others he responded to “mark” a floor.

Before the bewilderment of his colleagues, he explained that what happens is: that the BCRA puts active passes to 200 points of the daily average operated in the repo, that is, almost 66% and when weighs are left over at the close, which hits the caution, many pesos are not taken to those rates, although the option of the liquidity window remains. That is why it is not understood as there were entities that took pesos from the BCRA to almost 68% when there was a huge mass of pesos offered to 5% and up to 10%.

For the most seasoned, they were orphaned banks of lines. Not to mention the Armageddon that was armed with the integration of daily lace, instead of average balances. The head of the table of an international bank explained that, with this change, the entities close the box early and do not take a weight because they cannot place them and if they do not have 0% in the BCRA. Thus, the entire financial market is on the same side of the screens trying to park those weights in some alternative.

That is why the caution had a collapse. As a woman on the market illustrated: there are plenty of pesos, the lace up, the rates do not loosen, but the dollar and the inflation, for the moment, play together, that is, it is a balance as fragile as the midfield of Boca, but enough to win after 12 games.

Now, some are hopeful that September is a month hinge, but in the meantime, monetary policy will continue in mode “Financial Ozempic” A strict diet: fast inflation lowers, but the activity is with rebound effect. The market lady summarized: it was time to adhere, adjust belts and provide, but the bubbles will be soda instead of champagne.

The Government and the Elections

All this knowing that, according to Don Daza, there is no plan B, and that Plan A is to win elections, first Buenos Aires and then the nationals. The Caputo-Bausili binomial was clear, The monetary policy in this electoral period is not to allow an extra weight in the street, that is, the plan to gain elections is to stop inflation at any cost, even if that implies economic activity in pause and banks perspiring. Using the famous and controversial medication – to lose weight – it characterized monetary policy (high lace, contained liquidity and banks suffering bouncing effect) as “financial ozempic”: it takes you the desire to spend, you go down fast weight (inflationary), but be careful the collateral effects do not usually appear in the prospect.

Under the fog mantle of the fees, the policy also slipped, although more and more, tiredness and disinterest of the financial world is observed. What they hear from their political advisors is that today the political scenario has a short term, linked to what happens in Congress, a medium term, in the results of the provincial elections of Buenos Aires and Corrientes, and the long term, on October 26. That is, the long term, they are two months seen.

The occasional debate arose in Zoom and “Conference Call”, where the key to September will be who is perceived “winner.” In any scenario, except for an official catastrophe, La Libertad Avanza comes out airy and winning. Because, even if it loses in Buenos Aires, that will generate enthusiasm for October between its hard and annexes, while the PJ will lose electoral support from the Buenos Aires mayors who will have already achieved their mission in September. That is, whatever the Buenos Aires result, calls electoral support for October and the PJ loses.

The official objective is to have as many “hands” (raised) possible in Congress, in order to impose their ideas in laws and reforms. Therefore, violet lists are more integrated by people by commitment than for suitability. The mirror is Nestor 2005 and Macri 2017, get more than 63 deputies, for this they must take more than 40% of the votes. People are already half tired of surveys and speculation, and less bad that there was no step.

Politologists and surveyers weigh how much a low level of inflation will influence and how much a low level of activity and employment. For now, they recognized in a financial bunker, which is about to launch a Fintech, which despite the inflationary deceleration family income, especially what remains of the middle class, continues to suffer the closure of each month. Those of the cusp or flinch, those of the base of the pyramid survive with the update of the AUH and other plans, but the sandwich ham has no respite and that is why consumption suffers. Yes they detected an important recovery of the real income of informal workers.

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But in November another game would begin. The question that reigns at the tables is whether the ruling party wins, or is doing well in the legislative elections, with that it will reach it to recalibrate the exchange rate without unleashing a crisis like that of 2018. Because it is considered that, if it is not corrected, 2027 is very far away from the government. It is that the “Carry Trade” model precise to survive that the rate wins at the exchange rate, and cannot be corrected. The current real exchange rate is lowbeyond the fiscal surplus. Yes or yes it is necessary that the country risk Lower so that the Government can access capital markets and refinance the maturities, because reservations will not be enough, so the BCRA must start buying to prop up the low risk. The issue is whether the policy will allow to emphasize after October.

Follow the fight for rates

On the closure of the operations and with some signs from the congress a group of financiers shared a talk reserved with one of the market consultants in the market. From the meeting some messages were taken: monetary policy is not clear and less the exchange, nobody looks at the aggregate “M2 private transactional” set by the economic team itself, but rather the total amount of pesos, that is, the famous “broad monetary base”. Confusion arises because it is not clear the criteria by which the economic team allows to re-monetize via a “rollover” less than 100%, that is, when it considers that it is a genuine demand for money. For the consultant, everything would indicate that Caputo-Bausili look at the dollar.

That is why he affirmed that this monetary policy, so discretionary, cannot be extended for a long time, and all discounted after October changes in the script. Today the indicators account for the brake of the activity remaining below the end of last year. As there is no respite, next week it seems that the treasure must face maturity for almost $ 14 billion, of which more than $ 9 billion have banks and investors. That is why no one rules out a new round of lace and some regulatory changes to lower the volatility of the rates, especially the caution.

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At the time of the tracks, there was some consensus in which with a tamar rate of more than 50% the dual bonds look again. The accumulation of BCRA reserves was also a focus of attention, and a specialist distinguished between the precautionary reserves, which are obtained via external debt issuance and the reserves obtained from the intervention thanks to the commercial surplus or direct foreign investment or portfolio desolarization and are sterilized with debt in local currency. Precisely, he explained, these last reserves are those that improve the net external position of the public sector and reduce the sovereign risk. Something for the economic team to think.

The one who always appears noted for some pineapple is the minister Sturzenegger. Everyone tells the ribs and remember their passage through the management of Cambiemos. At a time when the “Pass Through” returns to the scene, a duo of Orthodox economists dusted a study that indicates that Federico’s approach on the subject was very optimistic and unrealistic, especially in the Argentine context 2015, which contributed to an inadequate economic strategy that ended up failing. Therefore, the duo warned, which several times the absence of “pass-through” was celebrated but then emerges as the phoenix.

However, they stressed that there are structural factors that explain a certain transfer at prices of a weight depreciation and that today are present as the history of high inflation and recurrent debt crises. But there are also other factors such as the tax consistency that economic agents value and that today could explain a low “pass.” We will have to wait a few more months to see if this is so.