The economic week will be divided in two, on the one hand, the collateral effect of the news known in the week that ends, and on the other, the news to come.
At the international level, the drop in Silicon Valley Bank (SVB), which is the 12th largest bank in the United States, would generate a poverty effect on the American economy, with a strong impact on American stocks and bonds. The bank run that it had could not stop it, the bank was bought in American treasury bonds that they had to sell at a loss to face the withdrawal of deposits, this decapitalized the bank and everything came to an end.
The deposit guarantee covers $250,000, however, the Federal Reserve will bear all costs and return all deposits. On Sunday afternoon another Signature New York bank went under.
Shareholders go bankrupt, depositors safe. This will bring with it more inflation, recession and future rate hikes.
Stocks, commodities and the crypto world will be affected. US treasury bonds will gain in price in a scenario of uncertainty.
In Argentina, stocks and bonds will be affected by international uncertainty. At the local level, the market has not yet digested the failure of the exchange of bonds in pesos, which was very low for the private sector. There are many bonds to renew in the coming months, and the market seems to have chosen arbitrage to alternative dollars, which is reflected by the rise in the MEP and CCL dollars. We do not see a rise in the blue dollar, due to the greater offer in said market, which is at the mercy of a selling market due to a drought that leaves the most painted without funds, now we must add the avian flu that wreaks havoc in the chicken market .
What’s coming, what’s coming
What is coming for the week at the international level is the consumer price index in the United States, an increase in this index will give the Federal Reserve arguments to raise the short-term rate to new targets, until now it was said that the rise would culminate in 5.25% per year, now the objective would be 6.0% per year. Currently it is located in the range between 4.50% and 4.75% per year. The next meeting of the Federal Reserve is on March 21 and 22.
For Argentina on Tuesday, March 14, the consumer price index is known, everything suggests that we will reach the 3-digit mark in the accumulated of the last 12 months. We don’t think it will lead to a rise in the Central Bank’s monetary policy interest rate, but we will be on the brink.
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To stop inflation, the United States and Argentina should carry out a policy of increasing reserve requirements, to reduce the bank multiplier. Raising the interest rate does not generate results, and we refer to what has happened in recent months. On the other hand, it would be essential for our country to reduce the fiscal deficit, something that the government would not be willing to do, therefore, all roads lead us to a scenario of recession and inflation, and we have left behind the scenario of stagnation with inflation.
In the Federal Capital it was announced that we have a drought and now the forecasts indicate a drop in GDP of 3.0% for this year, it could be a greater drop if this heat wave continues and the avian flu continues to wreak havoc in the countryside. The drought is a phenomenon in Argentina, which is why international prices drop despite the loss of production we have.
conclusions
The rise of the MEP and CCL dollar would continue to consolidate in a scenario of growing fiscal deficit, high inflation, and difficulties in renewing the debt in pesos.
The international scenario will continue to show difficulties, the bank number 16 measured in assets fell, this will bring collateral damage to the system. Stocks down, bonds up due to a flight to quality, the crypto world is in trouble again.
Drought is a catastrophe, and this will bring with it a break in the payment chain, fasten seatbelts and open air bags.
The avian flu continues to wreak havoc in the interior, this will bring with it a drop in production and a subsequent very slow recovery. The prices of beef and pork will increase after Easter. The government is taking a nap on this issue, it needs to generate incentives for the livestock and pig sectors, otherwise the problems will be exacerbated by a drop in the supply of poultry meat, drought and fewer births in the future. You have to think about vaccinating the birds, losing health status, but this may be the lesser evil.
We do not see a rise in the policy rate, but we will see a rise in the currency gaps in the near term. It is time to buy alternative dollars, or be more astute and buy other dollarized assets, which we are going to recommend in our private report on Tuesday, you have Monday to subscribe and earn money.
Source: Ambito
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