While liters of ink are spilled proposing a probable devaluation jump, resignations in the economic team, rate hikes, financial market intervention and even an exchange rate unfolding, the Government continues to bet on the same thing: leverage on more reserves, delay the rate of change, and leave a problem for the next government.
The latest market data
The price of the future dollar at the end of March is located at $209.6 and as of February 28, the wholesale dollar closed at $197.2This implies that the market is projecting a maximum devaluation of 6.3%, another month that they are going to devalue below expected inflation.
The devaluation rate expected by the futures market as of February 2024 is 128.0% per year, the future dollar for February is located at $452. This does not imply that it is fulfilled, under the gaze of the market today it seems probable that the exchange rate will continue to be delayed.
The linked dollar bond maturing on April 30, 2024 yields 2.8% per year, this implies that a devaluation is not expected. Investors have not turned their faces to the government, the dual bond maturing in February 2024 yields 6.28% per year. The T2X4 inflation-adjusted bond in pesos that matures in July 2024 yields inflation plus 12.6% per year. These returns are in line with those observed in previous days.
Sovereign bonds are still lying on the floor with clearly outlandish yields, it does not seem that they are queuing up to buy them.
Corporate bonds continue to show low yields when compared to sovereign bond rates of return.
Stocks don’t appear to have dropped significantly from their highs.
In short, the market continues to buy dollar-linked, inflation-linked bonds and negotiable obligations. Stocks feel firm, and sovereign bonds don’t seem to be in high demand.
He AL30 bond It was worth US$ 16.8, reached a maximum of US$ 31.2 and today it is worth US$ 24.8, these are volatile times.
The worse the better scenario seems to predominate, the greater the complications of this government, the easier it will be for the opposition to win, and that is an incentive for the markets.
What happened this Monday in the markets
The Government managed to get dollars from abroad, adding US$ 628 million from international organizations. At the same time, it managed to make the reserves more liquid by activating US$1 billion of the Chinese swap. On the other hand, it sold US$ 261 million in the market, since it faced a demand for dollars to pay a YPF negotiable obligation, a Santa Fe provincial bond, and bought LNG to supply gas in the winter. All this, added to a very calm behavior in the market, makes us think that the versions about resignations, exchange rate unfolding, and new sector dollars would seem to be invalid today.
Inflation in the last 12 months was 102.5% per year, state revenues increased 85.6% per year, demystifying once again that higher inflation does not help the Treasury, quite the contrary, more inflation means less collection.
- Expenses rose 95.0% annually, also below inflation, but higher than income.
- The result was a primary deficit of $228,134 million, which increased 199.1% over the previous year.
- In interest, the treasury paid a whopping $257,457 million, an increase of 325% compared to a year ago.
- The financial result, which is what it is worth, amounted to $485,591 million, which reflects an annual increase of 255%.
- In short, a very bad result. In two months of the year 2022, the financial result amounted to a red of $287,563 million, while in the first two months of the year 2023 it amounts to $1,023 billion. This implies an increase of 256%. It does not save us from descent Caruso Lombardi.
In this scenario we are going straight to a renegotiation with the IMF that will allow us a pardon in the future, and recalibrate the deficit targets that were located at 1.9% of GDP for the primary deficit. At the current rate, the deficit could be close to 3% of GDP.
The scenario is the same as always, the government has an increasing fiscal deficit, in the first two months of the year an increase in $1,023 billionand finances it with a monetary issue, monetary liabilities increased in the first two-month period in $1.1 trillion.
- In the first two months of the year, the Central Bank lost reserves for US$5,889 million.
- The official dollar in the first two months increased 11.3% and the blue dollar 9.3%. This denotes that they increased very little taking into account the deterioration of reserves and the increase in monetary liabilities.
- Looking to the future, the shortage of reserves, the wind against the world, and the recessive scenario in the domestic market make companies and individuals take defensive strategies.
- The fixed term rate at 6.5% per year does not look attractive with inflation for February at 6.6% per year and a projection for March above 7.0%. Treasury bills with a yield of 6.91% per year are not attractive either.
All roads lead back to the dollar as a haven of value. In a market where the banks are quasi nationalized, and the Government increases the deficit at a rate that calls into question the possibility of honoring the debt, I think we are going to an exchange of the exchange, until the next government takes charge of the Argentina. Inflation expected more than 120% per year, taking out loans is an invitation to liquidate debt.
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