Dollar bonds already accumulate a drop of up to 15% in February: what is behind this drop

local factors

Among the causes of the collapse of sovereigns, the analyst Joel Lupieri commented to Ambit: “Everything seems to indicate that the positive effects that the bonds had enjoyed with the repurchase announcement have begun to run out. It is true that what was announced by the Government seems to fall short in terms of a comprehensive plan, either as a pillar of growth or of stability. Investors have evidently taken notice of this and proceeded to enhance profit taking: selling their bond positions while their prices remained relatively high.”

The Government announced the repurchase of bonds in the midst of a situation of weakness with full currency run and many analysts began to consider that in reality the objective behind more than lowering the country risk was to bring peace of mind: “Throughout 2022, in the last stretch we did a very strong job of improving the maturity profile of the curve in pesos. At the same time, we saw a drop of 1,000 points in country risk. That means a window of opportunity. That is why we have made the decision to carry out a process to repurchase Argentina’s external debt for more than US$1,000 million, which begins on today”, announced at the time the Minister of Economy Sergio Massa.

Meanwhile, the analyst Gustavo Ber contributed: “After testing projected upper range parities, from tactical bets that were activated by punished prices, the operators have entered a “wait and see” and thus have stepped aside , for which they have been deflating despite the announcements of debt repurchase and the expectation for an eventual Repo, given that the latter would only aim to try to meet the IMF reserve goal”.

From the Bull Market Broker Research Team, they considered the announcement of the Ministry of Economy “reckless” about a new repurchase process “which triggered total distrust of Massa and the operation” while pointing out that the situation of the reserves does not help either. “We were once again -2,500 million in liquid RRII”.

“There is also a bit of pressure in comparable emerging countries, Egypt, Ukraine, Colombia are under pressure after the devaluation that Egypt had and the strong depreciation of the Colombian peso,” they concluded before consulting this medium.

External factors

However, it also seems not to have been enough due to the global panorama: “Beyond the perception of risk that is maintained due to the inconsistencies of the local economy (fear of non-payment, the imminence of elections, and the lack of clarity in the proposals) there are also external factors that act on the downside.In this sense, the inflation data in the United States seem to encourage the need to raise interest rates, which would lower risk assets (such as national bonds ) globally,” said Lupieri.

According Gustavo Ber“the rise in UST rates is acting as a condition, since it has been raising the yields of all emerging and global bonds – HG / HY – by acting as a reference to those of the USA and also rearranging the respective “spreads”.

For Salvador Di Stefanothe fall in dollar bonds is due, in the first place, “to the exterior and the change of scenario of the Federal Reserve of the United States. The Fed had set itself the goal of raising the rate to 5.25% and now as in the last slowdown in the last measurement of the consumer price index there was not a sharp slowdown in prices and the labor market remains strong, this today we have chances that in June it will rise to 5.5% That depressed this let’s say this bonds throughout the world Argentina in Ecuador and everywhere with which the drop in part abroad,” he argued.

“At the local level, my impression is that the government, which had a lot of momentum, had carried out a bond repurchase, slowed down the purchase and we entered a shadow cone with the possibility of the famous repo coming. My impression is that investors They are taking a break in February and March waiting to see if Argentina gets or does get a repo. This drop is going to be a buying opportunity because in April, May and June comes the eastern rally of bonds and shares linked to the electoral process. We are going to have many provincial elections, the candidates already nominated are going to be there and I think that the polls are going to be more credible at that time than they are now and that could have a rise. But today due to local, international factors and without repo it seems to me that the bonds are down”.