The President announced that a solution to the “put problem” will be announced in the coming days. This is the insurance of some sovereign bonds in pesos held by banks, which can trigger the issuance of pesos by the BCRA at any time.
After the blue dollar reached $1,500 for the first time at the close of the week, the president Javier Milei came out to announce one this Saturday two new developments in monetary policy, which aim to definitively end the issuance of pesos and thus keep the monetary base under control.
The president announced that the second phase of the economic policy called “zero emission” will be accelerated. “The excess supply of zero money (it could only be issued against demand for money) had as its central element the closing of the financial tap, which was to end the remunerated liabilities, and that we have already finished, therefore, the endogenous emission by interest of that debt is liquidated,” he indicated.
The news that the president announced is that “This week we are finishing off the puts problem,” he said, more precisely, about next Wednesday. Puts are insurance on some sovereign bonds in pesos that banks bought by paying a premium. That is, they can activate that guarantee at any time (sell their bonds), but it forces the Central Bank to buy them by issuing pesos. In recent days, The president of the BCRA, Santiago Bausili, held meetings with banks to evaluate how it is possible to end this financial mechanism.
On the other hand, the President announced this Saturday a change in dollar operations in the Single and Free Exchange Market (MULC). From the US, where he is travelling to attend a summit with billionaires, Milei explained that a new monetary scheme will begin on Monday in an attempt to achieve “total zero emissions.”
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He explained that the pesos issued by purchasing dollars in MULC will be “sterilized” by selling dollars on the market. In this way, he said, the “tap” of pesos will be closed from the sale of foreign currency on the external front. In this way, pesos will not be issued to cover these operations.
In an interview with LN+, the President explained: “Going from zero excess supply to zero emission also implies cutting the emission through the purchase of dollars. We buy dollars and inject pesos and what we do is sterilize the pesos by placing dollars in the market and in this way we ensure that the amount of money remains constant. This means that from now on the monetary base in Argentina will not grow any more.”
The measure should have an impact on the gap, which exceeded 60% on Friday in the informal dollar market, and which exceeded 50% in the financial dollar market. In this way, the Government sends a new signal to the market to try to deflate expectations of a devaluation.
Source: Ambito
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