The political noise and the financial chaos made investors flee to the dollar, this ran the gap forecasts in the future. Uncertainty to the stick.
How is the hand?
. – The government has been issuing piecework, there is a change of hands of the bonds in pesos. We were in a virtuous circle where citizens bought bonds and financed the State, and we went to a general flight from the Common Investment Funds, in this way the pesos fled to the stock market bond and to buy the stock dollar.
How was the evolution?
. – On June 8 the MEP dollar was worth $208.71, the price was a bargain as we said in these columns, on July 8 it closed at $286.20. A rise of 37.1%
. – On June 8, the Cash With Liquidation dollar was worth $210.31, on July 8 it closed at $300.89. A rise of 43.1%.
The gap widened
. – The MEP dollar gap is 126% and the Cash with Settlement is 137.3%.
Is it to sell?
. – In no way, in the past we got tired of saying that the gap traveled between 80% of the floor and 120% of the ceiling, today we regret to inform you that we are going to look for new horizons, it is very likely that the gap will rise to levels of 150 % or 160% in the short term.
Why so much?
. – Inflation for the month of July could be double digits, therefore, the government would have to hasten the devaluation of the official dollar. Today the official dollar in the futures market is trading at levels of $181.35 in the December position. Until now, this position was always a winner for the Central Bank and a loser for those who bought dollars. Consider that, in the future, this could change.
Do I buy futures?
. – Not for now, only a very low portion in the July position and only as a hedge if you have any commitment in dollars, placing yourself in long positions would be a mistake since today you pay high interest rates. For example, the December 2022 future dollar position is quoted at $181.35 and the cash position at $126.78, this implies an implicit rate of 90.3% per year. You have to wait to buy future dollar.
What will happen to the interest rate?
. – June inflation is known on Thursday, we believe that the Central Bank will take the opportunity to raise the interest rate, it should raise at least the fixed-term rate from 53% to 54% and the monetary policy rate from 52% to 53 % annual.
If inflation shoots up in July?
. – Let’s go by part, we expect an inflation of 5.3% for June, if in July there is an inflation of 8.0% this would imply that we travel to an annual inflation of 72.0% and if the inflation of July is of 10% inflation would skyrocket to 75.1% per year.
How high would the rate go?
. – The fixed-term rate should rise to levels of 60.0% per year. This would imply that lending rates on loans would spiral upwards, and this would leave SMEs without financing and the economy could suffer greatly, affecting employment.
In the week that ends we saw banks desperate to give loans to companies.
. – The banks rejected fixed terms and went out to lend funds, what happens is that the Central Bank stopped taking funds with the leliq at rates of 52% per year, in this way they pressured the banks to go out and buy public securities , however, the banks chose to pour liquidity into loans to companies at rates below 52.0% per year. It is a good sign for the economy, but very bad for the State, since the banks prefer to lose money rather than lend to the State.
How can I protect myself?
. – First, buying merchandise or supplies for your business. Second, with a fixed term UVA, negotiable obligations that adjust for inflation or promissory notes that adjust for inflation guaranteed by a reciprocal guarantee company. Third, buying any type of dollar bill. Fourth, government bonds in dollars, but beware that there is volatility. In fifth place, shares of Argentine companies that are a gift. In sixth place bonds in pesos at a variable rate or fixed term at a variable rate. In seventh place, a bond tied to the evolution of the dollar linked there are promissory notes and negotiable obligations tied to the official dollar, these instruments act as hedges against the devaluation of the dollar. In eighth place, bonds in pesos tied to the evolution of inflation (high probability that they will re-profile it at some point).
very short term
. – Companies that have liquidity must create their own mutual funds themselves, buying a mix of discount bills (lede), inflation-adjusted discount bills (lecer), and stock market bonds. In the medium term, the fever is still high, but it is falling, a bond in pesos maturing in 2023 yields 87.0% per year and a bond in pesos adjusted for inflation with a similar term yields inflation plus 11.0% per year. The market discounts an inflation of 77% one year ahead.
Countryside
What happens to agricultural raw materials?
. – Many producers were left unsold, they always sell upwards, not downwards, today we are seeing a technical rebound that will give way to many who remained unsold. Good recovery in corn and soybeans, with exporters improving their ability to pay, and with strong incentives to sell now. For example, July soybeans are worth US$395.50 and January soybeans are worth US$392.0. July corn is worth US$241 and December is worth US$385.
What do I do with the money?
. – Each company is a world, but from buying supplies, machinery or making a distribution of dividends and buying dollars at the head of the partners. Soybeans at MEP dollar value are at US$172.80 and corn at US$104.50. They are not the best values, we recommended selling when they were around US$280 and US$170.
What price should the producer look at?
. – Unfortunately, neither the Chicago price nor the local price should follow the price of soybeans to the MEP dollar, which is the price of the available divided by the price of the MEP dollar, it is the best tool for decision-making, but unfortunately there is no cross-cutting view of business, all views are horizontal and business decisions are made without having the vital ingredient of the price, the MEP dollar, which is the one that can be bought in the market.
Conclusions
. – Politically, the government is in trouble, and if it doesn’t resolve them, the market will be the sounding board. More political noise implies a rise in alternative dollars. We expect the ceiling of the alternative dollars around the 150% or 160% gap.
. – During the week there are debt maturities of the treasury, each maturity is insured and everything that is due will be renewed. The problem is who buys it, whether they do it privately or the State itself with monetary issue. The problem is that the State finances itself via issuance and that generates more expectations of inflation every month, rate hikes, more gap and therefore recession.
. – The BCRA market expectation survey shows less growth for 2022 and 2023, it projects a GDP increase of 3.1% for the year 2022 and 1.5% for the year 2023. It should be noted that in 2022 we already saw an important increase for the GDP of the first semester, therefore, what remains for the next 18 months is a very small increase. Economy concentrating and losing profit margins.
. – Regarding the inflation expected by the market, 76% inflation is expected for the year 2022 and 64.6% for the year 2023. In our private report we will provide you with comparative information on expected inflation, interest rate, wholesale dollar and alternative dollars of the year 2022 and 2023. Market forecasts versus their own.
. – June inflation will be known on Thursday, it will be around 5.3% per year, we expect much higher inflation in July, everything will depend on the announcements made by the minister, a priori we expect between 8% and 10%.
. – The interest rate could go up 1% on Thursday, we do not see a big increase ahead. We continue to recommend UVA fixed terms, which many banks are limiting and the Central Bank does not intervene by forcing them to take everything that the market asks for.
. – For those who place short-term silver Ledes maturing on 7/29 yield the equivalent of 72.2% per year, 30-day surety 35% per year and a lecer (bills adjusted for inflation) maturing on August 16, 2022 yields inflation plus 1.3% per year. Instead of buying a Common Investment Fund, you can go to a stockbroker and set up your own short-term fund. There are more variants in the private report.
. – Without resolving the political crisis, the dollar has no ceiling, the problems are more political than economic, for now all defensive strategies, politics shows no signs of rationality in sight.
In private reports you will find all the relevant information for decision making, this week you will have the evolution of the dollar and the construction indexes in the last 5 years, what we expect for inflation, interest rate, official dollar, and alternative dollar of for the year 2022 and the next 12 months.
Source: Ambito
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