According to Pedro Siaba, head of research at Portfolio Personal Inversiones, the Central’s intervention was focused on a single instrument (the TZXD5, a Treasury security that adjusts by CER), which, according to the regulations, can be carried out at a price equivalent to the rate of the last tender plus 200 basis points.
The issuance of currency for intervention in the local debt market in pesos is added to that carried out for the purchase of dollars through the official exchange market to add to international reserves. So far this month, according to private estimates, the total issued to obtain foreign currency is close to $3 trillion.
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Monetary effect
The Aurum Valores team affirms that with this issue it is expected Strong demand in today’s Treasury debt tender. If the Treasury later cancels debt with the BCRA, as it usually does when it obtains net financing, there will be a neutral monetary effectalthough will not improve the balance sheet of the monetary authority.
“If the BCRA issues pesos to repurchase debt in the secondary market, there is an increase in the entity’s assets and liabilities. If due to positive net financing the Treasury uses the pesos to cancel the debt that the BCRA had repurchased, The BCRA balance sheet will not have shown any improvement (assets and liabilities are lowered from the first step) without excess issuance,” he explains.
The analysts of the stock exchange company add that if the Treasury decided to use the positive net financing to buy dollars from the BCRA, instead of canceling debt, the monetary authority would see its assets in foreign currency (reserves) fall against an increase in assets in pesos (bonds repurchased in the secondary market).
Outlier analysts affirm that the operation is part of the commitment to put a buying edge on the last tendered title, as determined in the entity’s circular “A” 7954. They maintain that, at the same time, it is a product of the Government of maintain negative real rates and ensure liquidity in tenders.
“Most likely, most of this issuance will return to the BCRA in repos., at least temporarily, and then it will return to the Treasury tender. In principle, it will be monetarily neutral and will increase remunerated liabilities and holdings of public securities. But it is not neutral for the balance sheet and implies a reversal in the dismantling of remunerated liabilities“, they highlight.
After the debt tender, they highlight, “It will be necessary to see what magnitude the net financing that the Treasury obtains is and what it will be used for.“. As long as you deposit it in the Central Bank, use it to buy dollars or cancel debt securities, fiscal policy will continue to ensure that the operation is neutral in monetary terms, they maintain.
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