The ruling party urged the opposition to declare that they do not intend to “reprofile” any public title in case of accessing the government. Former minister and economic leader Hernán Lacunza said that it is difficult to know what the debt situation will be next year and that “it depends on what is done before” December. In addition, he stated that “not paying the debt is always the last option, before a major problem such as hyperinflation.” These twists and turns are far from trivial, given that, in an election year, access to the capital market not only depends on the current economic management, but also on future prospects.
The challenges that the Treasury faces in each tender are well known: without a primary fiscal surplus and with the direct assistance of the BCRA limited by the agreement with the IMF, it must not only borrow to cover the principal and interest amounts of the bonds and bills that are coming due, in turn, it is necessary to cover the differential between its income and non-financial expenses. For this reason, each successful auction is cause for jubilation among investors. Without predictability about what position the next government will take in relation to indebtedness in local currency, private companies are increasingly reluctant to facilitate rollover and the State takes a relevant role.
Specifically, this is evidenced by observing the implicit forward rate between the T2X3 and the TX24, an indicator that shows what rate the government must validate at the expiration of the former based on what is observed in the secondary market (where the BCRA actively intervenes), 13 August 2023, to renew it by issuing the second (or a similar title), which is approximately +15.5% in real terms. Given that it is difficult for such performance to be validated, the participation of the different organizations linked to the public sector will be key to avoid validating these rate levels and facilitating renewal.
The other side of the current situation is given by two fundamental issues. On the one hand, the secondary market, although intervened, shows no signs of panic. On the other, the recent successes in the latest auctions, focused on the placement of short-term titles. In conclusion, we could talk about a market without panic, but with caution.
However, While these difficulties are evident, corporate debt placements in the primary market are increasing. Specifically, in the week of February 6 to 10, nine companies issued negotiable obligations in the Badlar, dollar-linked (DLK) and UVA segments, for an amount of approximately USD 394 M measured at the official exchange rate. For this week, this number could be increased by almost USD 200 M more, totaling a figure close to USD 600 M.
Although there is a notable difference in the amounts, given that ARS 402,000 M or USD 2,090 M were raised in the last Treasury tender, it should not be overlooked that in the seven DLK corporate bonds placed last week, the average term was older than 3 and a half years, with an average TNA cut-off of the order of 2.35%. This implies not only placements with longer terms than those achieved by the Treasury, but also more competitive rates.
TSA Bursátil Research Team Leader
Source: Ambito
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