In the press release, the Ministry of Economy mentioned that beyond the situation in the liquidation of the harvest, they have support due to the lower levels of energy imports that Argentina is going to have to carry out with respect to what was projected in the 2023 Budget.
Regarding the risk country“will continue to fall with this measure. When the price of the bonds rises, their implicit yield falls and with this the country risk premium is reduced, which precisely measures the yield differential between Argentinean bonds and similar risk-free bonds (treasuries)”.
“Now then, the debt market in pesos is another story. The government is taking the opportunity to repurchase debt in foreign currency for which it would have to pay 1 to +/- 1/3 of its face value. Although this is positive news for the local market, does not change the debt scenario in local currency. Paradoxically, today the problem is not the debt in dollars (with interest payments only for just over USD2.2bll in 2023), but the debt in pesos. The key is for the inflation slowdown to consolidate and for the government not to rush to sharply lower rates or the rate of depreciation (the second has already slowed it down more or less to the rate of prices).”
The implications
According to the latest PPI (Personal Investment Portfolio) report, the buyback program may explain the buyback program may explain the recent rally centered on the short end of the sovereign curve. It should be noted that the GD29 jumped 6.3% and the GD30 rose 6.0% in the week, while the old indenture bonds reflected softer advances (+3.25/+3.5%)”.
For PPI, the question has to do with the funds: “Net reserves are around US$6,080 million, so the first phase of this program represents 16.44% of this scarce stock. Going deeper into the numbers, today we estimate that the private sector had around US$26.160 million (at current market value) of hard currency debt between Globals, Bonares and Eurobonds until 3Q22. Will Pesce give up those precious resources at the dawn of a dire drought to solve a problem for the next administration?”
As for financial dollars, they warn that it can bring calm and affirm that it is the “actual goal of this program, so the GD30 was explicitly its primary goal.” In the last days, the financial dollars set off the alarms with the CCL dollar exceeding $360, shortening the gap with the Qatar dollar that remains as a ceiling to observe the trend of the exchange market.
By last, Gabriel Caamano, Economist from Consulting Ledesma affirmed that in the short term the measure aims to “contain” financial dollars, “it may be that the first few days they fall and contain the gap associated with financial dollars.” Regarding the country risk, he added: “That it is in 1900 or 1700 does not change anything in your access to financial markets. Beyond the fact that it can go down something, it seems to me that it is not the objective of the measure. Argentina has closed markets “.
“It seems to me that what they are doing is formalizing an intervention mechanism in the parallel exchange rates. The Government has an agreement with the IMF in progress, the ability to intervene was in doubt as to whether the Fund could accept this. The heart of the matter: it is Massa telling the market by saying that he has a formal mechanism for intervention of the parallels that the IMF is going to approve. That in an electoral year where the gap was heating up and where we are seeing interventions from the parallels, it was probably the ANSES in recent weeks.”
Source: Ambito
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