The CER curve started the week with falls ranging between 1.3% and 4.3%. All instrument returns, except the October Boncer (T4X4)were in the double-digit range, with some close to 13% (TEA). In contrast, there was intense demand for Lecap and the shortest ones, increasing between 0.4% and 0.6%, and the longest ones increasing up to 1.8%, according to a report by Facimex Values.
This move reflects a reassessment of the market’s anticipated path of disinflation, “which expects inflation to be below 3% per month starting in August“. And that is inflation”break even“The spread between the October Boncer (T4X4) and the October 14 Lecap (S14O4) closed on Monday at 3.2% monthly for July, which represents a new drop compared to the 3.4% monthly implied at the close of last week.
An optimistic forecast
This digit It is about 0.6 percentage points below the 3.75% monthly projection for the month of Facimex, which is aligned with the high-frequency price data and the 3.7% monthly expected by the Central Bank, according to the presentation of its Vice President Vladimir Werning in the middle of the month in New York.
Estimating a short CER curve for the coming months, “The approximate inflation break evens indicate that the market also anticipates a strong disinflation in the coming months” the document states, with a monthly 2.82% for August implied in the Lecap of November 29 (S29N4), a monthly 2.3% for September implied in that of December 13 (S13D4) and similar figures for the following months.
Nevertheless, The inflationary path seems “excessively optimistic” compared to the Central Bank’s estimates and those of Facimex. The latest Expectations Survey (REM), corresponding to the June survey, showed that the consulting firms expected inflation of 4.8% per month for July, with a gradual decline of approximately 0.1 percentage points per month, reaching 4.4% per month in December.Our scenario is somewhat more optimistic than the REM, although less than market expectations.“, concludes Facimex.
Today, investment depends on how optimistic or pessimistic one is about the Government.
“Given that the Government’s monetary and fiscal policies seem to show obvious results against inflation, the market is quite optimistic,” he explains. Ambit Juan Alraportfolio manager of the group TPCG/Consultatio.
He adds that, Today the break even rate of inflation is 3% The market is therefore validating this, very much in line with Facimex’s estimates. Regarding what happened this Monday with the CER instruments, he maintains that there was a strong sale of them, “almost an inverted curve and a considerable appetite in LECAP (fixed income) that bets on inflation deflating.”
“In part we could say that today this is how things are going. Depending on the view, investors are more or less optimistic (CER or LECAP) but in recent weeks it seems that the market is finishing positioning itself in the optimism of a disinflation at the end of the year.”
However, he maintains that this does not mean that depending on the advertisements, they are sometimes not so clear, “The market feels a certain uncertainty about the future due to measures that are often unclear in part.“.
From Delphos Investment Maintains that “The market continues to bet on strong disinflationary pressure” and they agree in the view that the market anticipates inflation below 3% for the rest of the year.
“If everything goes according to the economic team’s plan and inflation falls to the current crawling peg level (2%), the interest rate will follow this trend and “Lecaps would be the winners,” In this scenario, the longest maturities in the curve would benefit the most due to their higher rate and the greater impact of the rate cut.
CER: long
Delphos It indicates, however, that the CER curve has a slight positive slope, “with yields ranging from 9.5% to 12.5%“. In this sense, the bet is on the titles in the middle part of the curve, that is, those that have maturities between 2025 and 2026, due to the high tforward handles that present. “It is important to note that the actual rates observed in the CERs They have not been at similar levels since the beginning of 2023when the slope was significantly steeper and inflation expectations considerably higher,” the brokerage firm recalls.
Soledad Lopezresponsible for development at Stock Market Ravatells this media that CER bonds are a great opportunity in the long termfor that of “diversify the investment portfolio“He argues that it is an interesting alternative to add to the position or increase it, given that the Argentine stock market is in decline.
For the strategist, it is important to note that although inflation is on a downward path, “It is difficult for it to break through the 4% or 3% monthly value, and this scenario will probably continue for several months.“. Therefore, CER bonds that have a high yield are attractive. Positive IRR of 10/12% on average. Especially long bonds like TX26, for those who do not have a position in pesos tied to inflation,
López highlights that current investment decisions are driven mainly by the position regarding the measures adopted by the Government in the short term. “The main unknowns are how the exit from the cepo and the debt maturities of 2025 will be resolved”; therefore many see buying opportunities in the declines that are being experienced, “since we are far from the highs of May and June“.
In this way, the recent fall of CER bonds and the strong takeoff of Lecaps reflect a positive reappraisal by investors regarding inflation and although the market is showing confidence in the Government’s ability to control price dynamics, there remains some uncertainty due to the lack of clarity in some measures and future announcements, which is reflected in national equity and sovereign bonds.
Source: Ambito
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