The BCRA confirmed that it concluded a REPO with five international banks for a period of 2 years and 4 months. According to reports, they received offers for almost US$3 billion, but they chose to take a lower amount. It was agreed upon for a low value and the market reads it, more than anything, as a positive signal that the Government seeks to give.
As a government source had anticipated Scope, The Central Bank of the Argentine Republic (BCRA) reported that it arranged with five leading international banks a passive repos operation (REPO) with BOPREAL Series 1-D securities for the total tendered amount of US$1,000 million and a term end of 2 years and 4 months.
According to the entity, in the inaugural auction, held on December 27, the BCRA received offers for US$2,850 million, almost three times the tendered amount. However, they said that, “Faced with excess demand and in view of the favorable evolution of its international reserves, the BCRA chose not to take a larger amount”.
“This REPO operation with BOPREAL securities provides the BCRA with a new tool to manage its liquidity in foreign currency at a lower cost than that offered by the options available until now.“, detailed the entity. And it assured that this new REPO tool increases the flexibility of the BCRA to mitigate imbalances that may exist between the supply and demand of foreign exchange in the local exchange market. “In this way, the BCRA reduces the risks around the implementation of its exchange and monetary policy objectives, and facilitates the anchoring of economic expectations,” they maintained.
The REPO is a signal to the market
Regarding the details of the operation, Scope was able to learn that one of the banks involved is Santander, which, in fact, during Javier Milei’s trip to the US, served as a link between the Government and some international entities to open spaces for relations with them.
From CEPEC, the consulting firm directed by Leonardo Anzalone, they highlighted that “this REPO is an important advance that strengthens the BCRA’s reserve position and improves its ability to manage exchange and monetary volatilities.” However, they warned that “its effectiveness as a tool to achieve a sustainable macroeconomic balance will depend on coherent implementation and articulation with broader structural policies.”
However, the amount of the REPO is small, so it can be seen that the BCRA seeks, more than anything, to give a signal to the market with this announcement. It aims to demonstrate that it is gradually returning to the international debt market and that it can obtain interesting rates. Likewise, the news comes at a time of exchange rate overheating after the removal of the PAIS tax and the lowering of monetary policy rates, so it is a key signal at a very necessary time since the demand for dollars increases in the summer by tourism.
This is confirmed by Scope the economist and director of CyT, Camilo Tiscornia, who highlights that “it is a low amount in a context of negative net reserves of around US$6,000 million, so it is not very significant if considered in that context”, but he points out that “the fact that the operation has been completed and that the rate obtained is good constitutes a sign to demonstrate that, little by little, the Government is managing to gain access to the international market.” Likewise, he indicated that “it is likely that they have rejected other offers (as the BCRA said in the statement) because they did not want to validate higher rates.”
“This was known to happen and is good as a sign, but the missing step now is to return to the international bond market
I believe that this is a strong message from the government to the markets, to mark its commitment to exchange rate stability in particular and macroeconomic stability in general, due to its importance for accessing international credit markets but also so that productive chains are not cut.
News in development.-
Source: Ambito
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