In the context of exchange tensions and in the run-up to the national legislative elections, the rates in weights they turn to reheat. The operators maintain that it has been going on for several days lack of liquidity in the system and that this could repeat the extreme volatility seen in the departure of the LEFIs.
In fact, this Wednesday, The one-day surety rate already operates at 44% TNA and the interbank REPO touches 57% TNA. They warn that if this situation continues, It is “likely” that corporate loan rates and fixed installments will rise again.
It should be noted that The Central Bank was putting a “floor” on interest rates in the BYMA simultaneous round, from where it absorbs pesos at 25% TNA (a level reached after the elections in PBA in an attempt to lower the high returns that affected the system). However, this week, this reference began to be lost faced with a renewed lack of liquidity in pesos, which was evident in the surety rate that exceeded 40% TNA, the interbank REPO that exceeded 50% TNA and the Lecaps that reached 48% TNA.
“The surety rate continues above what it had been operating and The only more or less convincing explanation for the increases has to do with the expectations of a rise in the dollar after the elections and the uncertainty regarding the continuity of the current scheme.“, they explained, on this day, from Outlierfrom where they also indicated that the rate increase “affected fixed income in pesos in general more strongly on Tuesday, probably because the aforementioned expectations are now fueled by sustained Treasury sales.”
Other market operators point out that, among the causes, there is the daily reserve scheme imposed by the BCRA that “worsens the situation” of the lack of liquidity in the marketbecause they explain that “when due to seasonal issues of the month the banks have excess liquidity, they end up placing it simultaneously with the BCRA” and that, on the contrary, When they lack pesos, they cannot compensate against previous days, and They have to go out and search the market, pushing rates up.
“Under the previous monthly average reserve scheme, Banks had greater flexibility to manage their liquidity, which facilitated intra-monthly balance without distorting the short-term rate market.“said the same expert.
The stock of overnight repos from the Central Bank in September reached $5.6 billion. However, with the departure of grain exporters from the MULC, the demand for dollarization once again gained prominence, PPI highlighted. “The sales of Treasury dollars, which so far have reached US$1,716 since October 1, and the intervention of the BCRA through dollar linked instruments, significantly compressed the liquidity of the system.” they added.
As a result, The stock of overnight repos from the Central Bank was not renewed, and fell to $1.7 billion on October 3 and $0.8 billion on Monday of this week. “The absorption of a significant amount of pesos by the Treasury and the BCRA drastically reduced the liquidity of the system (as we saw in the fall in the stock of 1-day repos with the BCRA), which was reflected in the collapse of the curves in pesos due to the increase in the interest rate,” detailed from this stock broker.
Are days of “extreme volatility” coming in peso rates?
“It is important to keep in mind that overnight rates can be extremely volatile if the system does not have a liquidity cushion,” consulting firm 1816, one of the most listened to in the city, warned in a report for its clients. The report recalled that this was what happened during the first weeks of August, a situation that was exacerbated with the daily measurement of reserves that was decided on August 18, before there were surplus pesos again.
It is worth remembering that later The Central Bank decided to put a floor on the rate again by taking passes passive and then transferred this operation to the BYMA simultaneous round at 1 day. “In short, what we are witnessing is something that we have already seen in the recent past: a lack of liquidity (that is, there is a transactional demand for pesos that pressures rates upward) but there are excess assets in pesos,” they highlighted since 1816.
As explained by this consultancy, The stocks of broad aggregates, including securities in local currency, are above the portfolio demand of savers. This basically means that there are many financial instruments in pesos (such as bonds or securities), but few people who demand them. “At the same time, the system needs a monetary base and the Government not only does not inject currency, but it destroys the base (via dollar and linked dollar sales),” they add from the report.
By 1816, if the BCRA does not return the pesos it takes out when selling dollars or bonds, it can reduce the demand for dollars, but before that happens, It can damage the bond market in pesos, because there will be more tension and less demand for these instruments.
Source: Ambito
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