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The Government placed $3.5 billion and continues the debt handrail with the BCRA

The Government placed $3.5 billion and continues the debt handrail with the BCRA

The Ministry of Economy placed $3.5 billion of debt in pesos this Wednesday. Thus, the team Luis Caputo continued with its strategy of migrating liabilities from the Central Bank to Treasury debt, a handrail that has as its mainstay the offer from the Ministry of Finance for the banks of higher interest rates than those paid by the BCRA.

On this occasion, it did so through three short-term fixed rate bills (LECAP), maturing on June 14, July 12 and August 16. In the tender, Finance received offers for $16.7 billionbut awarded 21% of the total since it had preset a ceiling of $3.5 billion.

In the call for the auction itself, secretary Pablo Quirno had defined a minimum rate for the shortest LECAP of 4.2% monthly effective (TEM). That is, a return higher than that received by banks for BCRA repos and also higher than that which arose from the price of that same bill in the secondary market. This is the incentive that was given to financial entities to lend themselves to the debt handrail with the Central.

The other two bills did not have a minimum rate. Finally, they were awarded at a TEM of 3.57% for the one that expires in July and 3.59% for the one that expires in August. “It represents a reduction in rates compared to the previous tender,” said the Ministry of Finance.

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Juan Manuel Franco, chief economist of the SBS Group, highlighted that “only 15.2% of the bids for S14J4, the shortest, were accepted, which marks the appetite to maintain low fixed rate duration.”

In addition, the Government announced that it will continue with the strategy of not applying the bulk of the money obtained from the placement of debt. With no maturities of relevant public securities to settle these days, Economía confirmed that “The award in this tender will be deposited in the Treasury account at the BCRA. and will be used to increase liquidity reserves to a total of $13.66 billion.” On this occasion, it will not use any part to buy back Treasury bonds from the Central Bank.

After the previous tender, the economic team had already decided not to apply most of the pesos obtained by the disarmament of passes. The official argument is that it seeks to generate a “liquidity cushion” that allows “guaranteeing the future roll over” of the debt that was taken on. Some voices in the market question that the Treasury pays around 4% of the monthly effective rate in pesos that it then deposits at a zero rate in the Centralat the same time that the BCRA maintains Treasury bonds that continue to accrue interest.

Debt: the handrail strategy

The tender was given within the framework of a set of measures that the Government took to accelerate the migration of debt from the Central Bank to the National Treasury. Two weeks ago, the entity chaired by Santiago Bausili once again lowered the interest rate on passive repos, which are held by the banks, to 40% nominal annual rate, which implies a monthly effective rate (TEM) of 3. 3% or 3.06% if the impact of gross income is netted. At the same time, Economía raised the LECAP rates as a way to encourage banks to enter the auctions of the Ministry of Finance. In addition, the BCRA established that these bills do not count towards the limits of financing to the Treasury that financial entities have.

Along the same lines, this Monday, the Government decreed an increase in the issuance limit for short-term bills maturing this year by $35 billion or its equivalent in other currencies.

What is this strategy due to? So much Javier Milei as Luis Caputo (both traveling this week in the United States) recently pointed out that The disarmament of the remunerated liabilities of the BCRA is one of the steps prior to the opening of the stocksfor which there is still no specific date on the horizon.

However, the analysts and market operators raise their concerns about this. “The transfer of repos to LECAP implies an increase in the Treasury’s commitments in the short term, and This makes it more difficult to get out of the trap. given that if there were no exchange control, the refinancing of Treasury securities would become more complicated,” stated a report by PxQ, the consulting firm of former Deputy Minister of Economy Emmanuel Álvarez Agis.

And he added: “Changing short-term debt from the BCRA (whether LEBAC, LELIQ or repos) to short-term debt from the Treasury (whether BOTE, BOPOMO or LECAP) does not change the nature of the problem: the surplus of pesos from the private sector positioned in public sector securities (either BCRA or Treasury) is the same and the conditions for exiting the stocks continue to depend on the level of the real exchange rate, the stock of international reserves, country risk and expectations about the economic program.”

Meanwhile, Franco considered that, “although it is positive to reduce the stock of remunerated liabilities of the BCRA, the sustainability of the scheme of channeling bank liquidity to LECAP makes a very solid fiscal anchor necessary, given that what is relevant in the background is the position of the consolidated public sector”, in a context in which there will be large biweekly maturities of Treasury bills.

Source: Ambito

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