Market reaction after official announcement: bonds sank to 6.9% and country risk exceeded 2,400 points

In the fixed income segment, dollar bonds collapsed to almost 7%, with falls led by the Global 2041 (-6.9%), the Global 2041 (-6.7%), and the Bonar 2038 (-6.1%). Thus, the risk country scale 5% to 2,459 basis points, maximum in 4 months. It is worth remembering that prior to Tuesday’s announcement, the bonds closed with gains of up to almost 4%.

As reported by Economía, it will order public organizations to exchange their bonds in dollars under foreign law (global or GD) for instruments in pesos under local legislation. The total amount covers about US$4,000 million. In addition, it will proceed with the incorporation of dollar bonds under local law (bonares or AL) in the CCL dollar operation.

“The measures aim to meet three government objectives: control the exchange rate gap, obtain financing in pesos to cover the fiscal deficit and meet the issuance goal with the International Monetary Fund (IMF) -of 0.6% of the GDP of transitory advances and profit transfers-“, reported from Cohen.

Find out more- I followed the price of the blue dollar, official, CCL and MEP in Argentina

“Based on our numbers, between FGS (pension guarantee fund), BCRA (central bank) and Treasury they have around 26,456 million nominal dollars of ‘Bonars’ and 2,826 million nominal ‘Globales’. In addition, the rest of the public entities would own close to an additional 3,750 million -almost all ‘Bonares’-“, estimated Portfolio Personal Inversiones. “We estimate that 50.2% of the ‘Bonares’ stock is in the hands of the BCRA, therefore which the effect of the ‘Bonars’ will be much less if only the rest of the public organizations -including the FGS- are obliged”, he added.

The Minister of Economy, Sergio Massa, met this morning with bankers to explain details of his decision. The meeting began after 9 o’clock this Tuesday in the Belgrano Hall of the Ministry of Economy. Massa was accompanied by the secretaries of Economic Policy, Gabriel Rubinstein and of Finance, Eduardo Setti; the head of the advisory cabinet, Leonardo Madcur; the president of the Central Bank, Miguel Pesce and the head of INDEC, Marco Lavagna, among others.

“We began to deepen the bond market in local law dollars, beginning with the purchase of holdings of ‘Global’ bonds from public entities, which will allow the foreign law public debt to be lowered, by some 4,000 million dollars initially,” highlighted the Secretary of Economic Policy, Gabriel Rubinstein.

The surprise measure tends to provide greater stability through the ordering of the debt holdings of the national public sector. “The State, without using central bank (BCRA) reserves, will continue rescuing and delisting ‘Global’ bonds, reducing external debt“, he narrowed.

Operators and investors awaited final details of the measure, to find out which titles are included in the measure and what the final scope will be, which will be published by decree in the official gazette.

Juan Politi of the Allaria Ledesma brokerage stated that “the objective is to stabilize the financial situation. I see it as positive”, while Sebastián Negri of the official National Securities Commission (CNV) affirmed that “it is a very good measure of financial order (. ..) the private sector took it very well”.

Rubinstein anticipated that with the implementation of the measures “restrictions that investors have today to buy ‘AL Bonds’ will be released” and that “this new demand will be supplied by the Ministry of Economy and the central bank, in coordination with the actors of the market”. He added that “in a sustained manner, the State will gain capacity to act in the financial dollar markets, which will make it possible to avoid disruptive increases in the ‘CCL’ and ‘MEP’, a key factor for the deployment of measures that strengthen the macroeconomic order.” .

The Sustainability Guarantee Fund (FGS) that manages the state pension agency will agree to purchase the Dual Bond at 60% of its technical valuesaid an official source. “In other words, the FGS will receive 100 bonds for every 60 pesos. This directly implies a revaluation of the FGS portfolio of approximately 2,000 million dollars,” narrowed.

Besides, The US Federal Reserve (Fed) raised interest rates by a quarter of a percentage point on Wednesday, But it indicated it is about to rein in further rises in borrowing costs amid recent turmoil in financial markets following the collapse of two US banks.

S&P Merval and ADRs

The S&P Merval stock index fell 1.7% to 224,914.58 units due to selective sales between energy and financial papers, and to the beat of the external volatility of the markets with the discount of the final position of the Fed.

Almost at the end of financial activity, INDEC reported that the Gross Domestic Product (GDP) rose 1.9% year-on-year in the fourth quarter of 2022 and ended last year with a rise of 5.2%, while the rate unemployment rate was 6.3% in said quarter.

Meanwhile, Argentine papers listed on Wall Street closed with the majority of losses. The declines were led by Cresud (-5.3%) and Grupo Supervielle (-4.4%). On the contrary, they closed with increases Despegar (+2.7%), and Edenor (+0.9%).