The Government closed a financial week on Friday “all cloth” with various positive news, within the framework of the trip he made Luis Caputo to Washington where he had a meeting with the director of the International Monetary Fund, Kristalina Georgieva.
He country risk stood at 967 basis points, and this way broke the barrier of 1,000 units for the first time after five years, since August 12, 2019, after the presidential PASO of that year. What was the news that boosted bonds? Do you still have a way to go? What is the market expecting now?
The six news stories that helped boost bonds
“When it seemed that local assets were beginning to falter in the face of the proximity of the completion of the laundering, more rabbits appeared from the galley,” said Andrés Vernengo of CMA.
Among the news that drove the strong rise in bonds was the REPO. The minister Luis Caputo confirmed in an interview with the Financial Times that Argentina obtained a loan of almost three years with private banks, in format REPOto face the payment of public debt capital to bondholders in January. He also assured that “if interest rates allow it,” he will seek to return to the international credit markets to refinance the July maturity, this is linked to the fact that the market hopes that it will be possible to return to international markets now with a country risk of around 700bp.
Another point is linked to the purchase of dollars that the Central Bank has been carrying out. lThe monetary authority maintains market purchases of around US$1.2 billion, which, although partly mediated by money laundering with the growth of dollar deposits, marks confidence in the government’s economic policy.
A third point is linked to the fact thatThe Government announced new funds: progress in the renegotiation of the agreement with the IMF, added to the fact that the World Bank and the IDB are going to provide financing for US$8.8 billion.
Fourthly, the FATF. Last Thursday, the plenary of the Financial Action Task Force (FATF) announced that the Argentina did not fall on the “gray list” in the fight against money laundering and terrorism. The declaration enables investments by foreign companies that, if Argentina were on the “gray list,” would have been prohibited from operating due to the legal restrictions of their countries of origin.
In fifth order of good news is the fiscal surplus: The Government’s reinforcement of fulfilling its initial mandate generates confidence in investors and causes bond prices to improve.
One last piece of information, no less important, that appeared last week is the wage growth: For the fifth consecutive month they showed an increase above inflation, which generates more political support for the Government to mitigate the “social unrest” due to some measures that can generate rispidities.
What is expected for this week?
The markets remain optimistic as in recent weeks, demanding Lecaps, bonds and stocks with an exchange gap of around 20%. According to the analyzes of the consulting firms, the bonuses can follow the positive incentive. Although the global context of greater uncertainty may affect the volatility generated by the US elections and the “whitewashing effect” is in its last week, Transitory corrections may appear but maintaining the positive trend.
“We must take this moment with caution, without euphoria. When there are these episodes or scenarios of euphoria, which feed off each other, it seems to me that in Argentina we know very well that with eso you have to be careful“said economist Fabio Rodríguez in radio statements.
This week, the Government faces the last tender of the month ($1.7 billion mature) and the Treasury will surely cut at market rates, without an additional premium because in the last week there was aStrong demand for Lecaps with returns of between 3% and 3.6% monthly.
“Market optimism derived from the improvement in inflation expectations has driven greater demand for fixed rate instruments, especially long tranches,” said Inveqc Consulting.
Source: Ambito
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