Strong disarmament of “Carry Trade” in the face of coverage demand: What were the instruments in more affected pesos?

The Futures of the dollar They shot on Tuesday and the market came to pay a official exchange rate At the end of this month, 5.1% above Monday’s closure. This demand for coverage Faced with doubts about the continuity of “Crawling Peg ” 1% also generated a DISASSEMBLY OF POSITIONS IN PESOSwhich raised the rates strongly. Analysts already talk about the end of “Carry Trade “tool that allowed succulent profits through rates in pesos and then acquiring dollars, and opened the possibility to the Central Bank (BCRA) of bulge reserves with strong purchases in the Mulc.

What happened on Tuesday in the future dollar market It is important to start analyzing what will come in the short term. The first three contracts, which are the largest volume operated, jumped 3.7% of $ 1,084 to $ 1,124 (March), 4.9% of $ 1,113 to $ 1,168 (April) and 4.4% of $ 1,138 to $ 1,188 (May). “With these strong advances, the market is paying a dollar at the end of March 5.1% above Monday’s closure, well above the 0.55% rise they should present to increase 1% in the month (+0.45%),” they said from PPI.

For its part, from ADCAPthey expanded: “On Tuesday, the dollar futures fired throughout the curve in the midst of the growing uncertainty of the market. December contracts now imply a 18% leap, well above 1% of ‘current monthly Crawling’, which suggests expectations of changes in politics after mid -term elections. The April contract, which expires after the IMF spring meetings, now discounts an 8%depreciation, pointing out early adjustments in the short term“

In turn, the economist José Ignacio Banoin talk with Scopehe also reviewed The main movements of Tuesday’s wheel: “If the market begins to speculate the dollar will not be such a calm, it goes out to disarm the positions in pesos and they will go out to buy dollars And just those were the movements we saw. The rate in pesos rose very strong, because the prices of the letters fell, because everyone went to sell them and began to look for coverage in the dollar“

In that framework, not only the contracts of the future dollar but also the Types of financial changes (MEP and CCL) and the illegal dollarmarked levels close to $ 1,300 with Gaps that exceed 20% compared to the official dollar. And as for the disarmament of Positions in pesosnot only were strong outings in the Lecapsbut also in the industry of FCIS: According to information from Outlieron Tuesday approximately $ 400,000 million were lost net Fija Income FCIS and Money Market.

Bonds in Pesos: Strong demand for coverage in the face of exchange doubts

Within what is the segment in pesos, On Tuesday the appetite for exchange coverage prevailed and the sovereign instruments dollar Linked advanced between 1.4% and 3.6%. In fact, market sources hold, this was evidenced In the fund industry, where a net positive flow of $ 5,780 million in dollar Linked could be observed. “While it is not a striking amount,” they said since PPIit will be key to see the evolution of these flows on the next wheels.

For its part, from Outlier They contributed their gaze on the movements in the local currency bonds, in the face of the disarmament of positions: “The peso curves, both of nominal fixed rate and tied to the CER rose significantly on Tuesday in the face of changing uncertainty and mass coverage in the futures market. The Lecaps curve already has letters that yield above 3% Tem. The real rates continue to the rise and now add more dispersion with few titles below 10% real rate “.

The “Carry Trade” comes to an end?: What reading does the market

“Having stayed The implicit rates of the futures well above the rates in pesosthere are incentives for the virtuous dynamics that we had seen in recent months in the Mulc, which had allowed the BCRA to buy a bulky sum of currencies. Both exporters and importers have incentives to disarm their ‘carry’ against the officer, what could lock the liquidation along with the demand for dollars having already guaranteed access to the Mulc to the importers, “they explained from PPI.

Market sources highlighted, about what happened on Tuesday, that Several banks were strongly positioned in future dollar contracts in the short term, and had opted to obtain profits through the “Carry Trade”. “The recent rise could be partly driven by a ‘Short Squeeze’, as these entities disarm their positions,” they revealed.

In turn, a report that circulated on the City Council 1816said who could have been the great buyers of dollars of the last days. Thus, he mentioned a Exporters Repaanting loans in argening, importers who had been postponing access to Mulc (to take advantage of LECAPS rate) or banks that were “short in the spot”. And before the question of why they bought, the answer was: because it is no longer clear that The “Crawling Peg” lasts much longer, because it was even doubted by the Minister of Economy, Luis Caputo.

Could a devaluation come? Bathroom He contributed his gaze on the exchange market: “I find it hard to believe that they will devalue. It seems to me that the government has as its main triumph, at least they see it, the fact of having lowered the inflation rate and having left the dollar calm months after the elections. In macroeconomic logic I would tell you that maybe the exchange rate may be a little high and that there may be some measure but there are other ways to gain real exchange rate that are not devalued. “