The Ministry of Economy wanted to ensure the success of the tender for Treasury bonds and bills. Before the event closed, the monetary policy rate was lowered by 10 points, pushing investors towards Capitalizable Letters (LECAP) at a high cost because they paid higher prices for these securities than those in the market.
In base at that high cost assumed, the official strategy worked. They raised $2.7 billion which, if added to what was collected in the previous tenders of the month, totals $5.7 billion, a figure that is 175% higher than the amount of maturities and this implies a strong absorption of pesos.
Regarding this particular tender, maturities were not covered for the first time in the current administration. “Not only did the Treasury not capture as net financing in today’s tender everything that was issued in the final rounds by the IDB. Furthermore, it is the first with negative net financing. For a bit. But it is,” explained economist Gabriel Caamaño. The maturity of $2.78 billion could not be fully covered with the $2.74 billion that was awarded (estimated rollover of 98%).
The combination of lowering rates and absorbing pesos to lower inflation is unorthodox, but the Government believes it will be successful in calming the rise in prices.
For now, the LECAP now yield, according to the term, 4.1% monthly for those that expire in March and 4.4% for those in November. Between the two letters they absorbed 70% of the funds awarded. The collapse of fixed-term rates is in sight and that is why it was not surprising that small and medium savers chose the dollar. For this reason, the “blue” rose by $20 and closed at $1,055.
According to Salvador Vitelli, financial analyst and agribusiness expert, “fixed rates above those of the market were validated. It is a tender that raises some alarms. With the issuance that the Central Bank had to make recently, the absorption of pesos was less than that of the previous tender when they took $1.7 trillion from the market. Now, they could not absorb $1.1 billion of the BCRA’s purchase of securities in the secondary market. In short, the Central Bank sold reserves against Treasury securities.”
The analyst estimated that the cost assumed by the Government in the bidding was $150 billion, as a result of the high prices that had to be paid for the renewal of the bonds.
For the Center for Political Studies, lowering rates “not only seeks to control inflation, but also to dismantle remunerated liabilities and reduce the quasi-fiscal deficit” which is what the Central Bank produces.
The lowering of rates did not hide the evils that came from the United States and that affected sovereign bonds. North American GDP growth was 1.5%, well below what analysts estimated and this means more inflation in the future. North American Treasury bonds responded with an increase in return rates to 6.75%, the highest level since the first days of last September. Jerome Powell, president of the Federal Reserve, warned that at least until the end of the year they will not cut interest rates, which affected all emerging countries.
In this way, the AL30D, the most representative Bonar, lost 0.6%. The Global 2030, which has New York legislation, which is the one that has the most impact on measuring country risk, lost 0.8%. In this way, the risk rose 29 units (+2.4%) to 1,234 basis points. It is the third consecutive round that sovereign securities have fallen, the investment most appreciated by local investors and foreign funds.
The Adcap Grupo Financiero report noted that “the bond market was offered throughout the round” and that the falls in the main bonds reached almost $3 below Monday’s highs. This implies a drop of 5%. They fell less than 7.5%, which increased the country risk.
Andrés Reschini’s F2 consultancy said that “given that high-frequency inflation measurements for food are collapsing, but a significant drop in inflation is also expected core, the Central Bank recalibrated the Monetary Policy rate again with a cut from 70% to 60% annually, which is equivalent to an effective rate of 82.1%. This ensures that the blender does not lose efficiency and also with certain timing since he did it before the Treasury tender. The rate cut hit futures that adjusted with losses of up to 2.9% for next February. “Both inflation measurements and the fall in rates put downward pressure on the futures curve.”
The financial dollars reacted upwards at the end of the wheel when purchase orders appeared from investors who wanted to get out of the market. carry trade (sell dollars and invest the pesos to then take profits in local currency and return to the dollar). There were too many rushes to undo the carry and the MEP increased $18.75 (+1.8%) to $1,034.06. Cash with settlement (CCL rose $26.9 (+2.6%) to $1,080.88.
In the Free Exchange Market (MLC), USD 404 million were negotiated, of which importers took 349 million and the Central bought only 57 million, which allowed it to increase reserves by USD 78 million to 30,095 million.
Among the bonds that adjust by CER, the increases were important for the shortest term, which is the one that exceeds the rates. Q2X4 rose 1.84%. Fixed rate bonds such as LECAP were the most favored and rose between 2 and 4%.
According to Nicolás Cappella, trader of Investing in the Stock Market “we understand that the market is beginning to move away from the CER curve, since it has 2 risks: a) disinflation that comes very quickly and makes us question what carry may be accrued in the future; b) The high level of parities that is maintained by the stocks and it is not known how long it can be sustained. We understand that point b) is gradually taking on more importance among investors, to the extent that rates and carry they keep going down. We will be attentive to how the CER curve operates since it leaves us with several questions.”
The Bopreal Series 3 bonds, which are used to pay debt to importers, had a tender that shows that they lost their initial strength. In yesterday’s tender, USD 113 million were placed. After this meager result, the Central announced that it is evaluating whether companies that have to distribute dividends or distribute profits abroad participate in the next tenders. This bait could be effective in the next tender on May 6.
Meanwhile, the Stock Market had a good run with notable business growth. The Merval of the leading stocks increased 3.5% in pesos and 2.6% in dollars. The most favored papers were those of Banco Supervielle which, given the rumor that it would be bought by Banco Macro, increased 7.10%.
ADRs – certificates of ownership of Argentine shares listed on the New York Stock Exchange – had a positive performance with slight general increases.
For today, caution is expected in the market that awaits Monday due to the treatment of the Bases Law that Congress will discuss on Monday and due to the already mentioned cost of the bidding. The Bopreals also did not help the faith of investors who notice that more and more carrots are needed to attract them.
