Debt: widening gap and devaluation expectations drive dollar-linked issuances by large companies

Even though the Government repeatedly denies any intention to devalue the official exchange rate, the market does not validate that strategy and bets on instruments that it offers foreign exchange coverage. It continues to sniff out the arrival of a devaluation of the official exchange rate sooner or later and this is reflected in an increase in the operation of dollar-linked assets, which has its counterpart, in turn, in an increase in the issuance of negotiable obligations tied to the exchange rate by companies.

The difficulties of the Central Bank (BCRA) to accumulate reserves In recent times, the determination of the Government to cling to the exchange rate controls and the problems in the dollar market that brought about an erroneous decision of lowering the monetary policy rate too much They raise doubts among investors and they are betting on a jump in the exchange rate.

Companies bet on ONs tied to the dollar

“There were several issues of these negotiable obligations tied to the dollar by large companies because these assets cover us from a possible devaluation of the official dollar and this week large companies are bidding on these instruments,” he reports to Ambit Juan Ignacio Alra, Portfolio Manager at Southern Trust.

He mentions, for example, the case of Vista (which tendered today) and another great example was Pan American Energy (PAE)which I bid at a 0% rate and There was prorating (oversubscription) of this ON. “This is reflected a fear of devaluation in the market at the beginning of the week which is combined with a gap that is starting to widen,” says Alra. Another example was the issuance of John Deerealso at 0% rate and tied to the dollar.

“For two weeks now the flows have been going towards the dollar linked emissions and these instruments are going out to look for products also tied to the dollar, such as dollar linked promissory notes“, describes about it Alan Zuchovicki, director of Finbez.

He says that, on average, Dollar-linked promissory notes are being negotiated at 100 or 120 days at 4% 5% per annum(official dollar). “In fact, a Panamerican Energy ON was issued at 0% official dollar for three years,” he mentions.

More dollar-linked debt in response to increased demand

“These issues respond to the appetite of investors because there were few attractive assets in this type of instruments until now,” he says. Emilse Córdoba, director of Bell Bursátil.

And he mentions that, “of the last ONs emissionswhich they have been placing in recent days, such as: Panamerican, Telecom and General Fuel Company They have achieved a better rate for issuers in the case of dollar-linked issues, even without a zero-rate interest coupon.”

Highlights that The financing in pesos that was best placed is in dollars linked. For her, this reflects that “an exchange rate jump above 2% of the ‘crawling peg’ is not expected.” And she notes that a change was seen in the debt issuance trend. “Before, the most attractive issues were in ‘hard dollars’ and, now, Investor appetite today migrated to the dollar linked“, says Córdoba.

For Zuchovicki, This trend does have to do with an increase in the expectation of devaluation.but also with the increase in the spread between exchange rates, given that it considers that “there is a very large flow to these products in search of coverage trying to earn this closing of the gap.”