The treasury decided to place securities for a total of $11.7 billion within the framework of the Central Bank repo rotation program for Treasury debt. Of that total, the rotation of transfers to bills of a total of 7.63 billion occurred, while $ 1.0 billion was allocated to repurchase by the Treasury securities that were in the assets of the Central Bank, to continue with the balance sheet cleanup. There is $3.0 trillion remaining that we will not yet know what fate it will have.
4 bills were placed in pesos at a variable rate that are capitalized, and are short-term that expire between June 14, 2024 and August 30, 2024, the effective rates of said bills are between 56.4 % and 63.8% annually, these rates are much higher than the monetary policy rate that the Central Bank pays for the repos, which is an effective rate of 49.15%, which makes banks prefer to be placed in bills in capitalizable pesos, and not in repos.
It must be remembered that banks pay to capture Fixed deadlines an effective rate that goes for placements of up to $100,000 at 33.9% annually, effective rates for placements of more than $1,000,000 at 37.2% annually, and effective rates for placements over $20 million at 38.0 % annual.
As can be seen, banks buy silver at lower prices than those that place this same money in repos or capitalized bills. What complicates the operation is the reserve requirements that the entities must make. However, despite the reserve requirements, there is always some reserve. useful, even if they say otherwise.
Are interest rates that pay the capitalizable letters (LECAP) They are paying rates that are higher than the expected one-year inflation rate, so we could say that we are already in positive rate territory, something that will harm those who have bonds in inflation-adjusted pesos.
Among the bonds that adjust for inflation, the most affected are the shorter bonds, and those that have negative internal rates of return (IRR), such as the TX26, which has a negative IRR of 3% per year, the TX28 has a negative IRR of 0, 5% annually, and the DICP has a positive IRR of 4.5% annually.
Bonds in pesos that adjust for longer-term inflation have moved to positive IRRs, while short-term bonds continue with negative rateswhich we believe will be converted to positive very soon as we observed in the mutation from negative to positive observed in TX28.
If the Treasury decides to place bonds in pesos at positive rates against inflation, what we have ahead of us is a very calm dollar price. If the rate beats inflation, this threatens a possible rise in the dollar.
If the Central Bank reduces its liabilities in pesos, it is eliminating the endogenous emission to pay the interest on the remunerated liabilities of the Central Bank. This implies a more orderly central bank balance, therefore, a wholesale exchange rate will follow the 2.2% monthly pattern, and a much calmer dollar bill (MEP, CCL or BLUE).
Note for those who read us on a recurring basis. Until Thursday we were worried because the Central Bank’s liabilities were very high, fixed-term rates very low, and we believed that we could see a run from pesos to the dollar. With the overreaction of the government placing short-term bills at rates higher than 56% annually, with decreasing inflation, We see no chance of the dollar becoming a protagonist. It also helps a lot that in April the government achieved a fourth month of financial surplus. This makes us think that the non-emission rule will remain firm, therefore, the rise of the dollar in the new scenario is ruled out.
The pace of the harvest has accelerated, and we should see more dollars coming in from exports. As of Friday, the Central Bank’s reserves stood at US$28,798 million, and we continue to think that in the next 10 days we will exceed US$ S 30,000 million reserves.
So far this year, the agricultural producer has sold 6.2 million tons of soybeans, 10.2 million tons of corn and 8.1 million tons of wheat at a price. There remain to be sold with a price of 43.8 million tons of soybeans, 34.8 million tons of corn and 7.0 million tons of wheat. This implies that there is a lot of money left to enter.
Conclusions
. – The new monetary policy sets us on a course of positive rates against inflation in the short term, this will cause bonds in pesos adjusted by CER to begin to show positive returns.
. – If the government continues to show a financial surplus in the public accounts, everything indicates that it will honor the payment of the debt on July 9, with which the sovereign bonds in dollars from the AL or GD family in all their versions should arbitrate the rise, lowering the country risk and leaving us at the gates of access to financing in international markets.
. – Retail inflation was 8.8% and wholesale inflation was 3.4% in April, there is still a long way to go to tame inflationbut it is no less true that they are decreasing figures compared to previous months, and this is good news.
. – The government reaffirms that it is not going to devalue the wholesale dollar, this implies that those who delay the sales of products that are exported are making a mistake, because for some months inflation would be above the devaluation level of 2.2% , and those who do not sell will lose purchasing power. Especially in the face of public and fuel rates that grow at rates higher than inflation.
. – In this context, everything suggests that sovereign bonds in dollars will continue to be winners, and that bonds in pesos adjusted for inflation will win against the dollar and inflation, but at a lower rate than they had. Within the diversification process we continue to choose these bonds.
. – For those who are fans of the fixed term, arbitrating it for a short-term State bond like the LECAP is a good deal.
. – Changing debt from the Central Bank to the Treasury takes us to a zero sum, Argentines will continue paying interest on the debt, whether in one place or another. However, this clarifies the global accounts, and tells us that the Treasury will continue adjusting the public accounts, thereby postponing the V-shaped exit from the crisis until later. The departure of the CEPO is a utopia within the framework of the scarcity of reserves, the lack of external credit, the delays that are in the field to sell the harvest, and until the new agreement with the IMF this is not said, this is not does and this is not touched.
Source: Ambito
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