CER or not CER: Is the appetite for inflation-adjusted peso bonds returning?

CER or not CER: Is the appetite for inflation-adjusted peso bonds returning?

In this regard, the latest report from Econviews He says: “Last week we were a bit more optimistic, but the numbers we saw make us think that it will be 4 again, perhaps a few tenths more. In August there may be less seasonal price increases, but there will be more regulated. And the dynamics of core inflation do not show any improvement. Our most likely number is 4%.” This analysis coincides with that of the consultant 1816which maintains that “The CER curve finally found its floor in the CER+12% YTM zone and long bonds compressed to CER +9%”

And he added that, “perhaps,” this finds its basis in the signs that there will be a clamp for longer and, in line with the consultancy of Miguel Kiguel, warns: “The rebound may also have been contributed to by high-frequency private indicators reflect the resilience of core inflation in August, which was 3.7% in May, the same in June and 3.8% in July.“.

For its part, Alejo Rivas, de Balanz, stressed that “Over the past two weeks, following the publication of inflation data and various high-frequency measurements, a slight increase in inflation expected by market participants for the coming months has been observed. This was reflected in the fact that the rise in the prices of CER bonds exceeded the increase observed in Lecap bonds.

Currently, says Rivas, “implicit inflation measurements are at levels closer to our projections. Although we believe that the path of disinflation will continue in the coming months, until last week these measurements reflected values ​​below our estimates.”

Appetite for the CER curve

“The CER curve continued to recover after the lows reached. Demand returned because short-term interest rates failed to consolidate in positive territory,” says Kiguel’s consultancy. Meanwhile, from FMyA They assure that The market is beginning to discount slightly higher inflation in the coming months.and, “for this reason it is turning back to CER bonds, which already yield between 5% and 9% from 2025when just two weeks ago the entire curve was above 12% annually.”

In conversation with Scope, Juan Jose Vazquezhead of analysis at Cohen Financial Alliesexplains that the feeling is that the “breakeven” of the expected inflation at these prices between Lecap and CER are low for the next three months and in this context, CER instruments would protect you against the possibility of a shift in the nominal exchange rate to partially or totally eliminate exchange restrictions.”

Inflation-1816.jpeg

Evolution of core inflation. Source: 1816

And as Vázquez rightly points out, futures on Rofex remain stable: the December contract is trading below $1,100, after falling sharply in recent days, while today the Lecap and the future dollar yield the same (about 44% TNA) Therefore, the cost of hedging a devaluation of the official dollar today is 0% (“linked” dollar) as opposed to safeguarding it via CER.

Pass-through and coverage against a surge in inflation

Martin Mazzadirector of MM Investments, He said in a conversation with this media that in the current economic scenario, the possibility of maintaining the fiscal anchor seems viable, “Although doubts persist about the sustainability of an official exchange rate with a controlled monthly devaluation of around 2%“.

And the recent promise of a 10% reduction in the COUNTRY Tax, “expected for next month, suggests a potential adjustment in the official exchange rate that could follow that same direction,” Mazza analyzes. “This context not only opens the door to a possible acceleration of inflation through the phenomenon of ‘“pass-through”but also underlines the relevance of CER-indexed assets as hedging tools,” he warns.

For Soledad Lopezresponsible for development at Stock Market Ravaslides that The CER curve is most attractive to invest the pesos at present. This, “despite the Government’s expectations of a decrease in inflation, the last reported figure was 4%, with a core inflation of 3.8%, which shows the difficulty in breaking through these values,” he maintains in line with what was stated above.

Lopez explains that the market sees it difficult to achieve inflation of 0% or 1% in the coming months, ““The strategist believes that there may be greater inflationary pressure. For this reason, she has decided to cover her positions with CER bonds, which, given their yield, are a very attractive option,” she says.

It should be remembered that last year, CER-adjusted bonds showed negative returns, which led the market to stop betting on inflation, expecting a controllable decline. However, now, given the difficulty of reducing current inflation levels, “CER bonds are once again attractive and are considered an excellent option for diversifying portfolios, especially in an environment of low or negative fixed rates,” says López.

CER bonds: what instruments is the market looking at?

From Econviews show preference for the middle range in Lecaps (S31M5 – S18J5) and “stretch the CER positioning to 2026“This approach seeks to take advantage of a disinflationary scenario and take advantage of the positive forward rates in real terms that the CER curve shows for that period. “Strictly speaking, if the scenario consolidates, it would be advisable to gradually extend the fixed rate duration to capture an eventual compression. This will depend on the inflation data,” says the consultancy.

Mazza, for his part, explains that a clear example is the bonus T2X5maturing on February 14, 2025, currently offering a yield of CER + 5%, compared to a fixed-rate Lecap with an annual nominal yield of 48% and a similar duration.

INFLATION ART

The market is witnessing a resurgence of demand for CER-linked instruments.

The market is witnessing a resurgence of demand for CER-linked instruments.

Scope

That is why since MM Investments They interpret this movement from fixed rate instruments to CER-linked ones”as an inflation protection strategy and the “pass-through”, especially in a context where exchange rate volatility has been limited by sustained intervention by the Central Bank. “This transition reflects a search for profitability in pesos with less exposure to the risks of an intervened exchange market,” concludes Mazza.

For his part, López de Rava analyzes that currently CER bonds such as the “TX26/TX28 They yield a CER of more than 8 or 10 points, which is attractive for those who keep their funds in pesos and/or seek to diversify their portfolios. This growing demand is driving up the volume of trading in these securities.“, concludes the analyst.

Thus, the market is witnessing a resurgence of demand for instruments indexed by CER, which reflects a hedging strategy against persistent inflation. Despite expectations of a slowdown in this dynamic, the market recognizes the difficulty of controlling inflation at current levels, which once again positions CER bonds as an attractive option.

Finally, for Rivas, from Balanz, “Going forward, and looking ahead to the coming weeks, we see opportunities in the CER curve, particularly in the early 2026 maturities,” although it also considered the Lecap curve, especially in the September-December period.

Source: Ambito

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