Repurchase of bonds: for the market, the measure has limitations to control the dollar

Caution, before the announcement of the purchase of debt bonds

“The announcement of the repurchase of debt made by the Government is a measure that aims to control the financial dollars. However, in the medium term the measure seems insufficient if the dollars used in these purchases result in a higher stocks that shifts demand towards financial dollars“, estimated Roberto Geretto, from Fundcorp.

“One of the possibilities to use the repurchased titles would be to contract a guaranteed loan known as a REPO, which would provide liquidity to the Government to finance foreign exchange needs throughout the year,” estimated the consultancy Delphos Investment.

“For this, it would be very favorable if the downward trend of the country risk continues, which would help to improve the financial terms of this operation,” he said.

“That official announcement (of doubtful repurchase) would only be understood as favoring future loans by improving expectations”commented VatNet Financial Research.

“The official move to raise financial expectations had an initial success that later faded. In any case, it was enough to reduce the country risk to around 1,800 points,” he added.

Expectations: inflation and reserves

“We understand that, given the low amount of net reserves, the official firepower to lift the parities (of the bonds) is very limited. This is evidenced by the still high implied default probabilities that still haunt globals,” GMA Capital Research said.

“The timing of this measure is doubtful after the bonds have climbed 70% during the last quarter,” he added.

“Future prospects also show clear signs that inflation will continue with high values”said IOL investoronline and pointed out that “towards the future, the forecasts are not yet positive as expectations are not anchored, and that certain monetary policies such as the increase in remunerated liabilities of the BCRA will not help for this to happen either”.

“January inflation is giving us similar to December, but I think that at some point it will start to overheat,” economist Fausto Spotormo said in radio statements.

“The numbers that we are seeing around 5% can give 5% and something in January, behind that there is core inflation remaining at 5.5%”he estimated and pointed out that “it is key how much money is issued this year and how much noise the elections will generate.”

“The latest rounds are beginning to show a renewed drain on reserves, which was to be expected after the ‘soybean dollar II’ and even accentuates concerns in the face of a panorama due to the drought of a lower supply of foreign currency,” estimated Gustavo Ber, from Ber study .

“There are problems to be resolved and the most immediate are the elections; what lies ahead is a scenario with moderate candidates and a scenario similar to that of 2015 is beginning to take shape., and the market will like it. But if polarization dominates, the market is going to be scared,” said Javier Casabal, of Adcap Grupo Financiero.

A report from the UIA Study Center (Argentine Industrial Union) indicates that “in the coming months, the industry faces a series of challenges. In particular, the shortage of some inputs for production stands out, a situation that has been occurring for several years.” months as a result of import restrictions.