The anchoring of inflation expectations and possibly better data that will be released by INDEC in the coming days, led the BCRA to make a surprise decision to reduce the monetary policy rate by another 10 percentage points, to just 7 days after making a cut of the same magnitude. The passes already accrue 50% TNA, which places the TEM at 4.2%. Without a minimum floor for the fixed term, the traditional banking instrument yields 3.5% monthly.
In the same line, lecaps rose 3.5% on average, while the middle section of the CER curve showed moderate increases as a first reaction. According to a recent GMA report, “The inflation path that prices the January lecap looks very optimistic and the floor of the medium and long CER bonds could be close. We particularly like the TX26.”
Although the CER bonds are trading at a negative rate, the expectation is comparable to the data from the Market Expectations Survey (REM) and the implicit average inflation where in the medium and long term, positive rates begin to be seen.
These decisions of the Central Bank lowering the rate pushes investors to have to take greater risks in their portfolios to beat inflation but also to resort even more to the capital market.
Investments in April: who were the winners of the month
According to GMA, fixed rate bonds, such as Botes and the Lecaps climbed to the top of the podium, recording returns in dollars of 23.3% and 17.1% respectively, being the only instruments that far beat the nominal value.
He UVA fixed term, an investment only available to individuals and with limited amounts, ranked third and earned just 0.1% in real terms (although the return in dollars of 12.5% cannot be ruled out). For its part, the CCL exchange rate advanced only 1% and boosted carry trade profits for the wide range of investment alternatives in pesos. In addition, the Boncers were strongly hit (-11.6% real) as a result of the rate cuts and lower expectations of nominal advances.
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What are lecaps
The lecaps, Capitalizable Treasury Bills in Pesos They are direct financing titles to the National Treasury short term and attractive interest rate. You can invest in LECAP by participating in the primary tenders (financing directly to the National Treasury) or by purchasing them in the secondary market through a stock broker.
The peculiarity of lecaps is that they pay a coupon at a fixed rate that does not decrease, even if the BCRA reduces rates.
The returns on fixed-rate instruments are useful for comparison with the returns on inflation-adjustable instruments. From this comparison, one can calculate what is the inflation rate that leaves me indifferent between investing in each of these bonds. This value is known as “breakeven inflation” and it serves to measure on a daily basis what inflation the market expects.
Source: Ambito
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