Market eyes phase 2, deja vu from Garfunkel’s book and more appetite for coverage

Due to the prevailing climate in the markets, both internationally, particularly towards Argentina, and locally Things are not in a position to double down on betsin the sense of intensifying conflicts, disagreements and rifts. At the local and global trading tables, the only thing that is heard in reference to the country is that it should “not make waves” on an already stormy sea.

If investors, especially foreign ones, continue to support the libertarian government, it is because of their conviction about the direction taken by both the President and the Ministry of Finance, rather than because of macroeconomic data. Funds and investors that follow algorithms have already put some money into some Argentine stock or bond, and some may even continue to put chips in, but those who are guided by fundamentalsthe political climate and the thermal sensation, have no choice but to continue looking at it from the outside.

It is not yet time to enter, they say in the conference calls. An old sea dog of the 80s market remembered, when he heard the conspiratorial complaints of the banking sector by Javier Milei, later replicated by Minister Caputo himself, the bon vivant and banker George Garfunkel, member of the homonymous economic group, who in turbulent months of Alfonsinism and at the dawn of the Southern Plan He published a fictional novel about what happened called “The Bankers’ Conspiracy”The adolescents of the local financial market will see that it was neither Cristina nor Mauricio nor Alberto, and even less Javier, who created the accusations of market coups and conspiracies.

Although the trigger is the same: the inability to generate confidence and improve expectations in the face of investor reactions that are not coupled with official wishes. A classic: when things get tough, all presidents resort to some supposed soap factory from Vieytes.

So much so that in a gastronomic redoubt near the Rosada, a group that can be considered, according to the official view, as the supposed “conspirators” commented that with the increase in exchange rate risk it was unavoidable that market expectations had deviated from the path of stabilization that the Government wanted to follow. Why do they say this? It is that While the Government says that it will gradually reduce the crawling peg from 2% per month, the market is hesitant and shows this in the futures, which are marking a crawl of more than double until the middle of next year..

”Such a difference makes the cost of error very expensive and that is why researchers are advising clients to look again at the DL (dollar linked)”, explained a “conspirator”. Hence, another diner brandishing a Cohen report showing how in recent weeks they had observed positive flows of funds to dollar-linked funds, breaking the trend that had been taking place since the beginning of 2024. It is not surprising, said another colleague-conspirator, in fact, it is logical that they seek coverage in a context of growing exchange rate uncertainty and with a gap of more than 50%. Another diner explained that he was also doing a lot of synthetic, at the request of clients, in reference to the purchase of fixed-rate bonds in pesos hedged with future dollar contracts. On top of that, there was a lot of loose money after the recent deserted Treasury Treasury bill tenders while the Treasury continues to accumulate pesos in the BCRA to obtain foreign currency in the near future.

In a reserved zoom with a liberal bias, they spoke openly, although moderating criticism of the aforementioned perspectives. Phase II of the Milei-Caputo modeleven though the exhibitors were already victims of official retaliation. It was said there that although Argentina had a window of opportunity in the face of the scenarios projected for Mexico and Brazil, there was a risk that a possible Trump government would raise long-term interest rates in the face of an increase in the fiscal deficit.

They consider that phase 2 is only to eliminate the BCRA’s debt, nothing more. They raised doubts not only about the drop in the COUNTRY TAX but also about the future of the dollar blend. There is great expectation about how they negotiate the change in conditions of the BCRA “puts”. They also pointed out that the core inflation was giving in and that Any base scenario has the end of the cepo at least at the end of the yearThey indicated that in September-October there should be something, they will have to make something known.

The latest numbers from a well-known polling firm were shown after the passing of the Bases law, which showed that people wanted management, and Milei still maintained an approval rating of more or less 50% with a hard core of more than 58% among men under 40 years old. They also observed that society became even more polarized since the margin of those who did not know or did not answer went from 10% to 2%. And something that is already vox populi, people are less worried about inflation and more about unemployment and poverty..

As usual, several virtual meetings on the topic of Whitening and moratorium, There is a lot of interest from individuals and companies. The Government hopes to collect 2 billion dollars and since the penalty is paid in dollars, it does not have an impact on the CCL dollar, although what could have some impact on the official exchange rate is the flow of Personal Property.

A small group of under-40s, regulars in this section, agreed with the prevailing climate where the market began to price in the not so favourable exchange rate expectations for the second half of the year, translated and summarised in the country risk premium of more than 1,500 basis points. Noblesse oblige, it should be noted that last week the purchase of the Quirón AM asset manager by Parakeet Capital was inadvertently recorded by mistake.

Those that did confirm their intention to merge were the Electronic Open Market (MAE) and Matba Rofex, which began the process to consolidate their leadership in the securities and derivatives markets, where the new company will be 50/50. The idea is to find synergies, improve technology, increase liquidity and depth of operations, and simplify settlement processes.

This group of men from the under-40 market exchanged figures from the Transfer Book, highlighting the cases of: Mauricio Rigal, highly appreciated among his peers, who together with Lucio Martínez left their roles as Commercial and Portfolio Manager at Galileo to become partners of the Parakeet management company; Oscar Barrera left Balanz to serve as head of capital markets, corporate and institutional at ConoSur Investment; in the new universe Consultatio (Eduardo Constantini) after the purchase of TPCG and Southern Trust, Javier Marcus was appointed as Business Director of the stockbroker, who will accompany Sigrid Tolaba, currently at Delta; while PPI added Brenda Mitidiero Soto from Barclays.

While waiting for the debut of the LEFI An expert in the field pointed out that the exclusion of the new bills from the credit fractioning rules is not conditional on the reduction of the balance of passive repayments, as was the case with the Lecaps tendered with the A-8020, so that the entities will not have any limitation to have the bills in their balance, just as with the passive repayments.

Regarding the exchange rate issue and the three conditions that President Milei set to unify the market, it can be seen that on the side of the remunerated liabilities of the BCRA there are now about $10 billion and that they will be transformed into LEFI on the 22nd, while the “puts” would be about $15 to $16 billion. There would be two alternatives, either the Treasury buys back the options and leaves the long bonds in the banks’ portfolio, or offers an exchange of the long securities with “puts” for short securities without “puts”.

Caputo and Bausili.jpeg

In the first case, the issue would be the willingness to deliver the “puts” and in the second, it would be reversing the swap of last March. Regarding the third condition, that the crawling peg converges with inflation, the question is when the CPI falls below 4%.

Part of this under-40 group that also traveled to Miami for the Copa América and celebrated the opening of another branch of the emblematic La Cabrera on McFarlane Street, a few meters from CocoWalk, has already signed up for the EMTA forum on emerging market corporate bonds, which will have as speakers John Guglieri (BancTrust), Christina Ronac (HSBC Asset Management), Karina Bubeck (Nuveen) and Sergey Dergachev (Union Investment) to discuss the recommended positioning for investors; the recent electoral effects on emerging markets and the upcoming elections in the United States.

There was also talk about the talks between Mariva’s people (Roger Horn, Ivan Carmona, Juan Barboza and Victor Lugo) in Rio de Janeiro with local investors where they analyzed the relative value of local obligations compared to corporate bonds in dollars, the political risk in the US and Brazil, the need to be alert to credit opportunities in global bonds and the improvement of the situation in Argentina. Meanwhile, the people from Banco CMF took Gustavo Cañonero to Neuquén to analyze the economic situation both nationally and internationally, accompanied by Fabián Bardelli and Estanislao Iturbe.