With the dollar ironed and low rates, this is the winning investment

The fixed term rate is located at 50% annually, if we take it to the effective rate it yields 63.2% annually, while the expected inflation in May 2025 could be located at 114.2% annually, this implies that Making a fixed term would leave us with a negative rate of 23.8% per year.

He bond in pesos adjusted for inflation TX26 yields inflation minus 0.8%, and expires on November 9, 2026. Clearly its profitability seems completely out of proportion with the fixed-term rate. If we look at the rest of the inflation-adjusted bonds we will see something similar, for example, the TX28 bond maturing on November 9, 2028 yields inflation minus 3.1% annually. The TZX26 and TZX27 bonds maturing on June 30, 2026 and June 30, 2027 yield full inflation. Longer bonds like the DICP yield inflation plus 4.9% annually.

Obviously there are many holders of peso bonds that have offered their securities, their price decreased, and since their technical value adjusts for inflation and rises every day, they have adjusted the yields until they match future inflation.

Someone could say that in this movement a new monetary policy is glimpsed, however, there have been no official announcements for now.

While bonds in pesos adjusted for inflation fell, sovereign bonds continue to set new records. For example, the AL29 bond is worth US$62 and yields 20.6% annually. The AL30 bond is worth US$59 and yields 20.6% annually. The AE38 bond is worth US$53.20 and yields 16.7% annually. The country risk is already at 1,208 points, and we should not be surprised if it soon reaches 1,000 points. For this to happen, bonds such as AL29 and AL30 would have to be worth between US$65 and US$68, with a 10% rise ahead.

The approval of the basic law would be a great boost for Argentina to achieve a country risk of 1,000 points. Something that would allow the government to reopen international financial markets.

The minister says he is going for more

The Minister of Economy has confirmed in a recent conference that he will continue with his policy of positive fiscal results, and has put his focus on currency competition, with an economy that needs to be remonetized. What I am going to express is under free personal interpretation, for the economy to have more pesos the Central Bank should buy more dollars and issue pesos, if the official dollar today is at $876.50 and the MEP dollar is at $1,037, 77 for individuals to sell dollars to the Central Bank with greater intensity, the MEP dollar would have to fall, or the wholesale dollar would rise. Assuming that in the next two months the wholesale dollar adjusts by 2.2%, we would have a price of $915.5 as of June 30. With the prevailing recession and with the narrative that the government has, we could think that the MEP dollar is more ready to be placed below $ 1,000 than to have a jump upwards.

The Government seems committed to lowering inflation and therefore adjusting the interest rate to a lower level. The implicit rate of the future dollar is located at 51.2% annually, aligning with the fixed-term rate offered by banks. Some banks for terms longer than 90 days offer rates lower than 50% annually.

The month of April reflects a drop in economic activity that could be greater than that seen in the month of March, formal employment has been falling and informal employment has been increasing but to a lesser extent, it would give the impression that unemployment would soon be the highest concern of Argentines.

The fall in public consumption drags down private consumption. Exports have not picked up, exporters do not want to sell their products with such a low dollar, and international prices at rock bottom. Imports are decreasing in an economic scenario of low activity. In this scenario, the government has held a series of conferences seeking for economic agents to bring greater investments, however, there are no concrete responses from the national or international business community.

If we do not see an increase in consumption, investment and exports, this leads us to think that the GDP this year is going to show us its most unpleasant side, a drop that could be around 4.0%, this will bring with it greater unemployment .

The government says that if it achieves a fiscal surplus it will lower taxes, but there is a small detail that is often not highlighted. The government needs a fiscal surplus and economic growth, since if it achieves a surplus and the economy is in recession, it will not lower taxes to fall into a deficit in the future. Something similar happens with the stocks, it will only be eliminated the day the government achieves a surplus and the economy grows. The stocks will be eliminated the day capital enters, and the government finances itself in the market without having to promise the banks that if there is a drop in the bonds it sells to them, they will be repurchased at a price that does not affect their assets.

Conclusions

. – It would give the impression that the peso market is disarbitrated, since bonds in pesos adjusted for inflation have neutral or positive rates, while the effective fixed-term rate is located at 63.2% per year, at a level similar to the implied rate of the future dollar.

. – The statement in the previous paragraph is probably wrong, and I accept that, perhaps the market is discounting that inflation in 12 months’ time would be around 63.2% annually, and we will see price deflation in the economy.

. – The value where future inflation will be placed will be settled by the market as the months go by, in the meantime, Argentina’s sovereign bonds continue to increase, and the country risk rate would soon pierce 1,200 points.

. – Shares measured in dollars have grown 82.6% in the last 12 months. The AL30 bond has grown 186.4% in dollars in the last 12 months. The profitability of bonds more than doubles that of stocks. This seems logical, the government guarantees you a fiscal surplus, and this implies that it will honor the contracts. Shares in this context rise, but they cannot be left out of a recessionary scenario, without investment in public works, and higher costs of public services. The big winners in the financial world are sovereign dollar bonds, at least for now and only for now. The TX26 inflation-adjusted peso bond rose 414.5% in pesos, against an inflation that stands at 290.0%. If we measure its performance in MEP dollars, it rose 116.5%, a clear winner for sovereign bonds. no rival in sight.