APPOTE FOR COVERAGE: The market doubt of the future of the dollar and accelerates the disarmament of “carry trade”

Where are the investor flows

Gabriela Friedlanderdirector of Asset Management in Balanz Capital, holds in statements to Scope that (in the fund industry) during the first days of this month there were exits in short -term funds (T+1) and Lecaps by $ 124,000 million. As explained by the strategist, this represents about 2.4% of the LECAP AUM and 1.5% of the T+1 AUM, respectively. In addition, it confirmed 2.4% outputs from the AUM of Variable rent.

“In turn, in an environment of negative net flows in the industryFixed Income Funds Linked and Inflation adjustable funds They had slightly positive flows”, Says Friedlander.

Paula GándaraCio de Asset Management of ADCAPslides that in the last 30 days there was a change of trend for the benefit of assets tied to the dollar “With positive net purchases for $ 65,000 million“On the other hand, the strategist asserts that the demand for coverage against inflation remains”quite shy“-By now- despite the expectations that inflation is above 2% in the coming months.

Gándara mentions that, at present, each of these classes of assets represents less than 3% of the fund industry, with a remarkable decline compared to their peaks in 2023, when they exceeded 10%.

For its part, Javier Martínez SerraPortfolio Manager of SBS groupindicates that depending on both national and international adverse context, in the last days and in the broker strategy it represents “increased coverage against inflation and exchange rate”

Martínez Serra indicates that at first, the market showed interest in dollar linked assets, “they arranged synthetic and then sovereign and on – but before a context of greater uncertainty, an adverse external front and possible definitions with the International Monetary Fund (IMF),“ we detect a growing demand for coverage in Hard dollarwhich generates pressure on the Financial dollar “.

He adds that this is also explained, because the valuations of the dollar Linked assets already reflect a scenario of greater exchange volatility, which becomes less efficient that coverage and reduces its rise potential. “In this context, they gain attractive instruments such as Cur Curve and active in Hard dollar “, Add the analyst.

“In bonds linked to the dollar, market prices already involve Una probability of 54% of a jump of 15%. In other words, given the uncertainty about exchange policy and assuming 50% possibilities of a change, bonds linked to the dollar (Tzv25 expiring in June 2030) with short positions discount a jump of 16%, “says Adcap.

Market doubts

In conversation with this medium, Rodrigo Benítezchief economist Megaqm, He maintains that when the exchange risk increases, the market is willing to validate to a certain price level and “Look for complementary coverage instruments”

Benítez comments that two factors were combined in recent weeks. “The market has more doubts about the exchange path of the coming months and, in turn, he no longer expects interest rates. ”That would explain that futures contracts are closed with higher prices and above the expected rhythm of the“ Crawling Peg ”.

For the expert, since the middle of last year, the economic team He managed to align the expectations of devaluation with the rhythm of “Crawling Peg”reflected in the decrease in the cost of coverage in the futures market. “When the market trusts the stability of the exchange rate and anticipates a low rate, that cost tends to approach the official adjustment rhythm,” he says.

For Benítez, the decision to make coverage depends on the position of each investor. But ratifies that “The first movement that was seen is the disarmament of investment positions that were “leverage” and that, therefore, they were more risky. ”

And while there is more appetite of investors to take coverage, “Volumes are still relatively limited with respect to other similar cycles“, Argues the strategist, which adds that” anyway, it is feasible that this appetite increases, as happens whenever there is volatility in the market, where the most conservative position is to lower duration, increase liquidity and raise coverage. “

Friedlander, meanwhile, concludes that these flows show that, Given the local and international uncertainty environmentfor different reasons in each case, it generates that the investor prefers bonds with variable adjustment, to the official dollar and inflation and leave the fixed ratewhich highlights clear correction upward of inflation and devaluation expectationsrespectively.

Demand after agreement with the IMF

Iván Vizental, strategy leader of Fifth investments, Analyzes in dialogue with this media, which after knowing that Argentina reached a technical agreement with the IMF “shot the demand for exchange coverage.” The strategist explains that investors speculate with a possible review of the CRAWLING PEG A 1% monthly and of the scheme of Blend dollarwhich is reflected in the rise in the price of dollar futures And the greatest demand for instruments “DOLLAR LINKED and the pressure on the official market “.

And although the government denied changes, the lack of clear signs of the IMF feeds these expectations, says Vizental. “Coverage is also manifested in a Jump in the implicit rate of futures (from 24.5% to 85% TNA) and on performance negative of the Dollar Linked bonds “, indicates.

Despite this, Vizental It slides that the coverage is not yet generalized: “The Treasury managed Expected inflation (from 1.7% to 2.7% monthly by 2025)which particularly affected the Lecap curve. “

Vizental concludes that the agreement with the IMF could reduce uncertainty, but urgent that the rules of the new exchange scheme are defined soon To avoid more speculation that damages financial assets and reserves, the expert concludes.

The reconfiguration of the flows in the fund industry not only marks a change of humor in the short term, but also raises questions about the capacity of the current economic scheme to sustain expectations if it fails to renew its confidence anchors. The reading of the specialists is unanimous: There is a rearrangement of portfolios towards more defensive positions.