FCI Money Market and remunerated accounts: how the drop in rates in the Passes can affect them

The paid accounts they turned a boom for the majority of Argentines since they allow money to be made profitable, in a context of very high inflation, but being able to use it at any time. However, in the last few hours, it happened that Common Investment Funds (FCI) Money Marketwho are behind these paid accounts, suffered a setback when The BCRA lowered the interest rate on Passive Repos (which are part of the instruments that these funds invest in).

It should be noted that this week The Central Bank of the Argentine Republic (BCRA) ordered a reduction in the Annual Nominal Rate (TNA) of overnight repos from 126% to 100% and also decided to maintain the monetary policy rate so the TNA of the Liquidity Letters (Leliq) remained 133%.

“I think obviously There is going to be an impact on the Money Markets Also this is a purposeful policy by Banco Centra encourage these funds to go a little longer and not stay entirely passive. That is, today if you are an FCI Money Market and you want to increase profitability basically You are going to have to get off your passes and go to Leliqs“he explained to Ambit, Eduardo Herrera, CEO of IEB Funds.

It is worth remembering that prior to Javier Milei taking office and with the expectation of imminent disarmament, of what he called “the Leliqs bomb”, The volume of the stock was drastically reduced and those pesos migrated towards passive repos, going from 28-day instruments to just one. Right now, The volume of passes amounts to $21.7 billion compared to the Leliqs, which stand at $3.3 billion which gives us a total of $25 billion in remunerated liabilities of the BCRA.

In this regard, Herrera analyzed: “Basically, that is the idea of ​​the Central Bank. provide economic incentives so that in some way these funds extend durationand don’t stop at one-day passes and I think it’s a good strategy, that is, punctually you could have a drop in rates in the short term “but everything is aimed at forcing the Money Market funds to return to Leliqs.”

A report of MegaQM demonstrated this trend, The FCIs as of November 30 paid up to 113.66% interestwhile on December 14, after the drop in the interest rate on liabilities, The FCIs paid up to 107.4%. What will generate a moderate impact on the profitability of virtual wallets.

The Economist José Ignacio Bano in dialogue with Ambit explained that the support of the FCI and fixed terms are these instruments of the BCRA. This is how he tells it: “The bank’s Treasury asks for money from clients and asks them to pay the rate for a fixed term. He turns around and places it on different instruments that previously a large part of that went to Leliqs and now to passes. So depending on the rate you can place at is the rate you can pay at.”

“If the rate goes down, then fixed terms and paid accounts may pay less. In fact, we also saw that the bonds had dropped a little in performance, so all the instruments in which these funds invest fell a little. “I don’t think at this moment that it’s scandalous, but it is for it to go down a little,” Bano concluded.

What is the BCRA’s strategy behind the drop in repo interest?

“The BCRA seeks to reposition remunerated liabilities in Leliq instead of reposwhere they had recently been located due to the uncertainty surrounding the resolution of paid liabilities expressed by candidate Milei,” highlighted a report from Outlier. “Subsequently, through an increase in rates validated by the Treasury, it is intended that these liabilities rotate to the latterincorporating a put in the style of the previous administration by the BCRA,” they explained.