Investments in pesos: what bonds beat the fixed term and inflation so far in 2023?

We are approaching the second half of the year, with an Argentine economy going through the pre-electoral period in a high nominal environment. Now very close to entering the election phase, it is convenient to readjust the investment portfolios, for which it is necessary to analyze the evolution of the different financial assets in the local market throughout the year.

A report of criteria identified the investment winner in the weight race of this 2023considering the distinctive types of bonds available to the investor in the local marketwhich exceed traditional investments such as fixed term, and even double the accumulated inflation of the year (42.2% until May).

Race to the pesos: Global bonds maintain leadership

Return by type of asset, in pesos, by period

As can be seen in the graph, the Global Argentine sovereign bonds issued in dollarsbut considering its return in pesos, They continue to be the star asset within the fixed income universe, according to criteria.

“In a previous report this year, we had identified this type of asset as the one with the best performance at the beginning of 2023. In the run-up to the elections, this behavior deepens,” they remarked. Indeed, the global bonds generated a return to the investor of 52.6% measured in local currency, and 22% only in the month of May.

This return exceeds performance of other assetsincluding those that adjust for inflation such as CER bonds. In turn, it is higher than the increase in MEP dollar (+44.2%), and higher than accumulated inflation, which with May values ​​would be around 40% this year. In this way, a real return of more than 10% was perceived until the beginning of June in 2023.

The better performance in pesos of Global bonds is largely explained by a “increase in the implicit financial exchange rate, as well as an improvement in the parity of the original bonds quoted in dollars”, they indicated from the Stock Exchange society.

In the last month, the Bonares local law dollar bondsmeasured in pesos, had a similar performance: of the order of 22.2%. However, when contemplating his return in the year, pressured in his offer by public entities, is below the performance of its Global peers. It stood at 40.2% so far in 2023.

Weight race: CER bonuses and Duals completed the podium

In particular, the debt in pesos that adjusts for inflation (CER) and Dual bonds (the largest adjustment between CER and official devaluation) completed the podium in May. The perceived returns are 11.5% and 8.8% respectively, followed by linked dollar bonds with 8.5%, already off the podium.

If 2023 is examined in its entirety, the Dual bonds are the second best asset with a return of 45.1%, while the CER debt of the medium tranche comes in third place in this race of pesos with a performance of 44, 8% Effectively, the CER and Dual instruments served up to now as a hedge against the inflationary shock.

Without a doubt, the last active in this weight race were the fixed rate bondsin the face of a market that leaned towards hedging options in the face of the main risks facing the economy today: a jump in the exchange rate and an acceleration in the inflation rate.

Weight race: the context to come

Already very close to the closing of the lists and the primary elections in August, the local debt market begins to enter electoral territory. “This will be the drivers together with the evolution of inflation and the dollar, of the behavior of assets in the second semester”, they warn from Criteria.

In this sense, they believe that “One of the main challenges facing the Government in the face of the elections is to maintain the helm of the economy, mainly the shortage of dollars and the inflationary element. The nominal value is already at high levels, above 8% per month.”

In turn, the government In order to do so, it must ensure the financing of its deficit in the local market. In that sense, the The latest refinancing figures brought some relief to the peso curve. The Treasury, assisted by public entities, obtained a net financing of 148% in May, being the one with the highest net amount of the year.

Rearming the maturity profile after the exchange, The maturity wall is maintained for the next four months: around US$1.6 billion per month mature at the financial exchange rate.

Weight race: investment recommendations

As can be seen, the different types of Treasury bonds show dissimilar returns in the comparison between peers. The winners of the weight races vary from period to period depending on the context and the movement of economic and financial variables.

“In an environment of high nominality, where the race is at high speed, it is essential to have adequate advice to optimize the management of the investment portfolio in pesos and protect the purchasing power of liquidity and savings,” Criteria suggests. .