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Debt: more than $3 trillion matures in April and the market draws up scenarios to define its bets

Debt: more than $3 trillion matures in April and the market draws up scenarios to define its bets

The financial front of the Government will take into account April one of the most important stops of the year after the exchange of debt in pesos that postponed 77% of the 2024 maturities, the vast majority of which were in the hands of the public sector. This month, More than $3 billion expires with private ownership. But beyond the task of refinancing these titles, which as the stocks continue to be in force is not an insurmountable challenge, the April tenders will leave signs of the macroeconomic path proposed by the economic and the reading that investors make about the future of the key variables: inflation, exchange rate, gap, interest rate and exit from the stocks. Thus, after the return of the LECAP in the latest Treasury placement, the market is deciding whether to bet on that instrument or the CER securities.

The maturities of market-operated securities that remained after the exchange totaled $3.4 trillion in April, according to data from the Congressional Budget Office (OPC). The consulting firm 1816 estimated the monthly commitments somewhat lower, at $3.2 billion. All in all, it is the month with the highest debt payments in pesos along with July, when the expiration of the last day of June, which falls on Sunday, must also be canceled. In April, some US$2 billion also expirecorresponding almost entirely to maturities with the International Monetary Fund.

The two largest payments in pesos in April fall at the end of the month: on the 30th the linked TV24D dollar bond ($2.2 trillion) and the TDA24 dual bond expire (almost $700,000 million). Before, on the 14th, just over $400,000 million of Boncer T3X4 (indexed to inflation) expire, according to OPC numbers. Although the Ministry of Finance has not yet specified its auction calendar, the market expects that there will be two tenders before each of those dates.

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The last of the minister’s placements Luis Caputo and the secretary Pablo Quirnothe first after the exchange, brought as a novelty the return of the LECAP. This is a fixed rate letter compounded monthly, which has not been offered since the forced re-profiling of 2019 carried out by Hernán Lacunza. In this case, a LECAP was proposed as of January 31, 2025, which received offers from investors for $2.2 trillion, of which Finance took $545,488 million (leaving three quarters out) at an effective monthly cut-off rate of 5 .5%, below the rate of passive repos of the BCRA (6.8%) and the BADLAR (5.9%).

Market scenarios: LECAP or CER?

City analysts believe that it could be the beginning of a new curve of securities in pesos at a fixed rate, which had not been offered since December of last year. In the absence of greater reference points for this type of letters, they evaluate assumptions and scenarios for the main variables in order to infer what the market for inflation and interest rate policy for the remainder of the year. Something that operators consider relevant when defining which instruments to turn to: LECAP or CER?

In 1816, they compared the performance of the LECAP as of January with that of the Boncer T2X5 (the most similar in terms of duration) and concluded that, for the TEA of the T2X5 at CER-20.6% to equal the 89.1% to which closed the LECAP S31E5 last Tuesday, “inflation in 2024 should remain at 157%.” An inflation deceleration horizon that, a priori, looks optimistic: it is 53.2 percentage points lower than the CPI projected by the last Survey of Market Expectations (REM) carried out by the Central Bank, which was carried out before the publication of the February data (lower than expected), and 43 points lower than JP Morgan’s forecast for this year. The next REM, with updated forecasts, will be known on April 8.

Thus, the consulting firm (one of the most read in the City) maintains that all Investors who demand LECAP “are paying an opportunity cost in terms of carry to hedge against the risk of new cuts in deposit rates”. The thing is that, for it to be convenient to subscribe to that bill for almost 10 months instead of renewing a fixed term of 30 days (whose rate today is higher) by capitalizing interest, the Central Bank should redouble its strategy of negative rates at least in the short term.

Based on that, trace three scenarios “non-disruptive” facing the exit of the stocks and exchange rate unification, to evaluate possible market bets. Javier Milei wants to move forward in this direction, but recently he recalculated his urgency since he considers it risky to release the exchange market in a context of still negative net reserves. As a way to accelerate the process, the Government is negotiating options for new external debt with the IMF and international funds (of which there are no certainties for now).

He First stage of 1816 is that the unification be postponed to the fourth quarter of 2024, in line with the latest Staff Report of the Fund, and that this occurs after a period of deceleration of inflation with stability of the cash settlement dollar (CCL), in which the BCRA deepens the liquefaction of paid liabilities (and fixed terms) through successive rate cuts. “This is the scenario in which it makes sense to position yourself at a fixed rate (even at the cost of giving up carry and lengthening duration) to ‘lose as little as possible’ in real terms,” considers the consultancy.

But in a second scenariowith unification also in the fourth quarter and sustained inflation or exchange pressures, the equation would be different: “In the CER versus fixed rate debate, if inflation persists above 5% in the second semester and there is no significant change in the BCRA rate policy, then it will have agreed to be bought in Boncer 2025.”

If eventually the exit from the stocks were brought forward “towards the middle of the year” after obtaining such external debt, the third scenario It would be “quite risky for fixed-rate placements with residual terms greater than three months,” according to 1816. Everything would depend on the exchange rate regime adopted, the firepower of the Central to contain potential exchange runs, whether there is a devaluation jump or not in that framework (with a field that presses for better conditions to liquidate) and the evolution of pre- and post-unification inflation.

That is why the firm considers that “buying LECAP at these prices is betting completely on a narrow path” like the one described in the first scenario. And concludes. “If everything goes ‘too well’ and the Government is confident of releasing the stocks before the fourth quarter, then it would be necessary for the unification to occur without a jump in the spot and without acceleration of inflation (either with floating or crawling). peg below the CPI) so that the LECAP maintain their valuations once they are no longer supported by the stocks. Taking everything into account, we think that CER bonds maturing in early 2025 have a more attractive risk/return ratio than LECAP.”

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Source: Ambito

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