Debt in pesos once again draws the market’s attention given the possibility that Sergio Massa prevails in the runoff. Thus, with the projection of high inflation for the coming months and the possibility of an exchange rate split, it opens a new game for investors. Ambit He consulted with specialists to know what strategy to take: dollar linked, dual or tied to CER.
Debt in pesos and the possibility that the ruling party wins
A report of IEB Research indicated that the CER curve showed significant advances, especially in those securities with maturities after 2025, which implies that “Inflation will remain high in the short term given the electoral incentives of the ruling party to continue with an expansive fiscal and monetary policy in the face of the runoff.”
In this regard, they revealed in their latest report that after the collapse of financial dollars and the relative calm that they currently show in part thanks to the liquidation of exporters due to the differential dollar, “the market could be choosing to position itself in securities in pesos to make a short-term rate that can provide an interesting return in dollars”.
In relation to the possible scenarios posed by this election, for this report, the victory of the ruling party would clear up a lot of uncertainty for the debt in pesos, making it the most constructive scenario for this type of assets.
Failing that, according to IEBthe dollarization proposal, which last week was ratified by the LLA candidate, “would imply that the debt in pesos would become comparable to the current hard dollar debt that operates at parities around 30% against parities of 100% of the first. This difference in parities suggests that it is difficult for securities in pesos to suffer capital losses in the event of a conversion to dollars.”.
Another report from Adcap Research indicates that after the general elections and the probability that Sergio Massa will obtain victory in the second round, Market concerns about immediate dollarization diminished significantly. The report estimated that the expected exchange rate jump implicit in Bond prices (dollar linked and linked to the CER) fell from a maximum of 93% to the current 60%.
Options to invest in bonds in pesos
In both his moderate and aggressive conservative portfolio, Maximiliano Donzelli Head of Research IOL investonlinerecommends having 10% of the total invested in the Linked TV24 Dollar Bonus: “This is a bond linked to the official TV24 exchange rate, with the aim of beginning build coverage against the exchange rate in the face of uncertainty which is planned for December of this year. The TV24 bond maturing in April 2024, pays its principal at maturity and has an approximate duration of 0.61″.
For, Juan Pedro Mazza Fixed Income Strategist Cohen, “CER bonds look cheap and an exchange rate split is not yet in market prices.” Taking into account rate, term and liquidity, the bonds were highlighted TX24, T4X4 and T2X5 as your favorites. In particular, he highlighted the CER bonus to February 2025 (T2X5) due to its high real rate of 8% and strategic maturity at the beginning of 2025 that “allows it to fully capitalize on the high Argentine inflation of 2024.”
At the same time, he mentioned that, with the unresolved exchange tensions, he also recommends incorporate instruments linked to the dollar as a hedge against the risks of program implementation. To this end, he recommended the dual bond to August (TDG24) and the dollar-linked bond to March 2025 (TV25).
From AdcapFor their part, they believe that The market will seek to increase its coverage positions before the second round. Therefore, they recommended exchanging inflation-linked bonds again for dual bonds as the TDA24 and the TDG24 To catch a potential additional yield of approximately 20%.
“We maintain our preference for dual bonds (which cover the greater of both risks), since they are only 1% or 2% more expensive than dollar-linked bonds but we expect them to be much more in demand by investorsespecially if the market begins to translate some type of exchange rate split into higher prices,” they closed.
Source: Ambito
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