The government’s economic team concluded a mega debt swap in pesos. The operation sought to take advantage of the low interest rates of the secondary market of bonds that adjust for CER to extend the expirations of short term and postpone them until between 2025 and 2028.
With this initiative, the Government managed to kick debt maturities for the next few years by $42.6 billion that fell this yearwithin the framework of a strategy aimed at containing the financial deficit and adding some beans towards the objective of lifting the exchange rate.
The Ministry of Finance announced that the operation reached a 77% acceptance on the total of the titles that expired in 2024. As anticipated Ambit, the bulk of the participation came from the public sector which had in its possession nearly two-thirds of the securities in question.
In this context, through the Joint Resolution 16/2024 of the Ministry of Economy and the Ministry of Finance published this Wednesday in the Official bulletin, The issuance of new public debt instruments and the expansion of an existing one was arranged to cover the operation, for a total amount of up to $60 billion.
The instruments that will be issued are:
- National Treasury Bond in pesos zero coupon with adjustment by CER expiry December 15, 2025
- National Treasury Bond in pesos zero coupon with adjustment by CER expiry December 15, 2026
- National Treasury Bond in pesos zero coupon with adjustment by CER expiry December 15, 2027
The instrument that will be expanded is:
- National Treasury Bond in pesos zero coupon with adjustment by CER expiry June 30, 2028
This measure, although ambitious, presents some opportunities and challenges for the ministry plan in charge of Luis “Toto” Caputo.
Opportunities
- Reduced short-term refinancing risk: By lengthening maturities, the government buys time to improve the fiscal situation and strengthen investor confidence.
- Decrease in financing costs: The operation could generate significant savings in interest payments, easing pressure on public finances.
- Stabilization of the debt market: The extension of the maturity curve could contribute to greater stability in the peso bond market.
The challenges posed by this measure
- Acceptance by investors: the success of the mega-swap It will depend largely on the acceptance it has among investors.. It is crucial that the government offers sufficient incentives for them to agree to exchange their securities for others with longer maturities.
- Risk of interest rate increase: If the interest rate increases in the future, the government could face higher financing costs.
- Impact on inflation: the operation could generate an increase in inflation in the short termif investors demand a higher interest rate to compensate for the longer term of the new securities.
The objectives of the mega debt swap
The objectives set for the execution of this operation are multiple and converge on the optimization of the country’s financial structure, according to the official text. First of all, The aim is to exchange existing public securities for new instruments with longer maturities.a strategy aimed at strengthening the strength and long-term stability of public debt.
A parallel goal of great relevance is the reduction of the cost associated with public debt, which implies efficient management of financial resources and a reduction in short-term financial obligations, adds the Official Gazette. “This approach will contribute significantly to economic sustainability and to the responsible management of national finances“, Add.
In line with the above, another fundamental purpose of the operation is to effectively finance the National Treasury deficit.
The recipients of this operation cover a wide range of actors. Among the main beneficiaries are the entities of the National State, which play a central role in the management and direction of economic policy. In addition, entities from the financial public sector and the financial and non-financial sectors also actively participate in this initiative, thus consolidating intersectoral collaboration in pursuit of common objectives.
No less important is the inclusion of natural and legal persons with relevant holdings of the Eligible Securities as direct recipients of the operation.
Together, these objectives and recipients outline “a comprehensive strategy that seeks to strengthen the country’s financial position,” as well as foster economic stability and promote the active participation of various sectors in the construction of a solid and sustainable economic future, concludes the standard. .
Source: Ambito
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