The CER bonds they had a major correction in the last two weeks which was influenced by expectations of a much more pronounced slowdown in inflation than was believed at the beginning of the month.
Specifically on Wednesday Long CER bonds rebound strongly amid rumors of rate cuts that were finally finalized on Thursday, with the BCRA announcing that it is lowering repo rates from 70% to 60% TNA, which gives an effective monthly rate of 5.05%.
The financial analyst Franco Tealdifrom their networks, wondered what is happening with the CER bonds: “Very simple, The market is pricing in a strong slowdown in inflation, so it is taking a fixed rate and getting rid of CER.. This is reflected in: a decrease in the fixed rate, an increase in the rate in the CER, and a decrease in the breakevens (this is “how much inflation has to be so that I don’t care if I am in a CER or in a Lecap at a fixed rate”) .
The BCRA tried to support the prices of CER bonds
He Central Bank of the Argentine Republic (BCRA) resorted to the issuance of some $246,000 million at the beginning of the week to support the prices of bonds adjusted by CER, which were strongly offered. The figure is equivalent to 89% of the financial surplus that the Treasury achieved in March.
According to a report published by the consulting firm Outlier, the BCRA bought bonds again in the peso debt market both in BYMA and in the MAE. Besides, details that they operated 12.6 billion nominals of the TZXD5 bond maturing in 2025.
“Meanwhile, estimates from operators indicate that The BCRA would have purchased 164 billion nominals of that same bond in the MAE, following Communication 7,954 where it reported that it would be present in the MAE round to avoid sharp falls in prices. at a level similar to the last validated in primary bidding,” the report revealed.
According to Delphos Investment“fixed rate instruments continue with increases and the implicit inflation (rate), their downward path, being that On Friday it was at 8.1% monthly in the term to August and closed at 7.7%”, they observed.
What will happen in the short term with the CER debt
Market sources revealed that after the last Treasury tender, which took place on Thursday, the sale of these bonds continued throughout the curve, especially in TX26. For his part, the TZXD5, he TX25, he TZX27 and the TX28 They would have been left with little private ownership.
It should be noted that Economy placed in its last tender a Lecap (fixed rate) November 24 (S29N4) with 4.4%TEM, and $1,121,471 million. For its part, the Lecap (fixed rate) March 25 (S31M5) with 4.10%TEM, for the amount of $611,614 million. Additionally, a Boncer (adjustment by CER) was placed on March 26 (TZXM6) CER with 2.95% (TNA), for $607,583 million. And finally, Linked Dollar bonus (exchange rate adjustment) June 25 (TZV25)- devaluation -1.02% (TNA), for $393,081 million.
“Private consultants estimate that the regulated ones could be adding 5pp, which would imply an April CPI significantly below the REM by 8.5%. The possibility of an inflationary collapse that takes April to 6.5% and May to 4%, would still leave room for aggressive sales in T4X4, T5X4, T2X5 and TC25P“, they expressed this week from a well-known stock broker.
“This assures us that the BCRA, to avoid new interventions in the secondary market, would have to reduce the rate by another 10pp. The BCRA and the MECON could have realized the interaction between remunerated instruments, the CER and cross arbitrations in each tendersince the rate of remunerated instruments keeps the bidding rate of fixed rate instruments high, which causes arbitrage,” they concluded in their analysis.
Source: Ambito
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