“Linked” Bonds, the official play to attract dollars abroad and try to meet a crucial goal with the IMF

The government made it clear: The central objective, at the moment, is to sustain the disinflation goal, even above other very important decisions such as The accumulation of reservations agreed with the IMF, which requires adding around US $ 5,000 million before June 13. In spite Alternatives to reinforce the balance of the Central Bank (BCRA).

In that framework, Scope participated in an event in Max Capital where they assured that the “Linked” Bonds They sound stronger and stronger in the City as part of the official strategy chosen to capture Currencies without direct intervention of the BCRA in the exchange market, and being an indirect route to swell international reserves. How do the “Linked” pesos work? It’s about A debt in pesos that can Subscribe in dollars and aims Non -residents. This It would contribute not only to the debt rollover in dollars, but also to the objective of accumulation of reservations with the International Monetary Fund.

Thus they explained from Delphos How they imagine the operation for placement: “When the Treasury Tender Rollover is less than 100%, the Treasury issues pesos to cover the market financing deficitusing existing deposits. This increases liquidity in pesos and, eventually, reduces the stock of bonds in circulation. Thenthe BCRA would place new titles in pesos whose subscription would be made with dollars. In return, at the expirationthe payment to the investor would be made in dollars, calculated at the official exchange rate set at the time of the issuance. “

Monetary Base and Reservations

Thus, The Central Bank obtains currencies and increases reservesalthough the debt stock in pesos expands. “If both movements are nete, The result would be a simultaneous increase in the monetary base and reserves, which can be interpreted as an indirect purchase of dollars by the State, without formal intervention in the change market and within the framework of the established exchange band “they expanded from the same report.

It should be noted that in recent days one of the unusual movements that was recorded in the market was A strong drop in the price of dollar futures contracts in the December position, with a volume operated near US $ 900 million. From the City, various voices argue that this drop in the price could be due to An intervention carried out by the ruling party in order to reduce the cost of coverage and stimulate the demand of the instrument.

Federico Dominguezeconomic analyst, it was also expressed in the networks following the debate on this operation: “Any debt in pesos (mainly the one in the hands of non -institutional private ones) is potentially convertible into dollarsso if the fork is local or foreign, it makes no difference (especially in a bimonary Argentina). The important thing is the control of the BMA and the constant absorption of pesos via fiscal surplus. “

The same expert also assured that, with the elimination of restrictions, Argentina could initiate its incorporation into the local EM indices Currency Government Bondsan index of Government Bonds of Emerging Marketswhat would anticipate significant money flow tickets. It is important to highlight that in 2017, The non -residents had $ 25,000 million in local currency debt, although during that experience the instruments ended up impact after the outbreak of the exchange crisis.

“Linked” bonds: between the advantages and long -term consequences

During The first seven days of May the gross reserves deteriorated about US $ 700 million While the nets were even above that value, due to the expiration payments of Bopreal, interests and other positions to the IMF. That is why from Outlier The glove on this rumor that put the government itself and pointed out that It is speculated with A potential issuance for an amount for US $ 1 billion.

The analysts of this consultant warned that a “Linked weight” bonus has Direct influence with the future dollar market since foreign investors are expected to cover that risk through contracts.

“This possible broadcast would not only contribute to the accumulation of reserves, but also entails certain risks. The main lies in the fact that, within six months, at the expiration of the Linked Weight Bonus, a strong demand for dollars in the market could reappear If there is, by then, an expectation of improvement in the macroeconomic situation or an investment alternative with attractive yields similar to the current ones, “they said from Outlier.

They also wondered, What would happen with the exchange rate not only at the time of the expiration of the bonus, but also after the tender. “Will the BCRA continue to defend this exchange rate level? Will new dollars reach the market that there is no significant margin for upward correction?”

Repo: The other window that opens to accumulate reservations

During the day on Tuesday the vice president of the Central Bank (BCRA), Vladimir WerningHe confirmed that the entity will go to search in the short term a repo type loan with a “broader set of international private banks”. This was expressed during his speech at the Annual Congress of Argentine Institute of Finance Executives (IAEF): “Las liquid reserves They will continue to reinforce with disbursements of multilateral organisms. The confidence generated by stage 3 and the more than 350 basic points that country risk has fallen, allows us specify in the short term the expansion of new facilities of Repo del Bcra with the participation of a broader set of international private bank “.