The note of the week that ended and that is projected on the one that begins today, is the sharp fall of all CER bonds at the same time that UVA credit offers appear on the market, which are also tied to the cost of living.
The reason is that the market now has a deep-rooted conviction that there will be a significant drop in inflation. For this reason, investors began to exit bonds and CER Letters to turn to fixed rate ones. For them, having a Capitalization Letter (LECAP) that yields a little more than 4% per month beats a long-term bond that is quoted by the price index. All this, assuming that the dollar will not make any sudden jump.
This equation caused the CER bonds to lose more than 5% on Friday, although they remain one of the most profitable investments so far this year because they accumulate gains of more than 80%.
According to the Investing in the Stock Market trader Nicholas Cappella “This is relevant because if that begins to be priced, the outflows of CER bonds begin to be relevant. Because if we go to a market without stocks, the CER curve cannot yield negative, but rather should be at levels more similar to those of the sovereign curve. Therefore, if the market bets on this scenario, the parities of the CER bonds may suffer even more.”
“The exits from CER bonds are beginning to be relevant. If we go to a market without stocks, the CER curve cannot turn negative and should be at levels more similar to those of the sovereign curve” (Nicolás Cappella, Investing in the Stock Market)
Adcap Grupo Financiero sees an opportunity in dual bonds that adjust for inflation or devaluation. These bonds were in demand with the exception of the one that matures in June, which was demanded in the week and “are a good alternative within the front end of the inflation-linked bond curve.”
Sovereign bonds managed to interrupt three consecutive rounds of decline. The increases were not notable, but they managed to cause the country risk to lose 21 units (-1.7%) and close at 1,210 basis points.
The consulting firm 1816 confirms what excites the market and points out that monthly core inflation, which reached double digits in March, “seems to be around 5% in April (some measurements give much less and most say that end to end the numbers are even better), which reflects that, at least until now, the combination of fiscal adjustment (with financial surplus), exchange anchor and collapse of activity (“there is no money”) was enough to deflate (the monetary reform was not needed). . And forward? The Central Bank trusts that business margins can be reduced, consolidating the process.”
The F2 consulting firm Andrés Reschini He sees with concern “the delay in the harvest, as a result of the bad weather, added to the low international price of the oilseed (‘for soybeans) which causes a stagnation of the volume of liquidations at a level lower than that of the first week of February. while a growth is being noticed in the quantities demanded by private individuals with access to the official exchange rate and all this slows down the rate of accumulation of BCRA reserves. It is expected that as weather conditions improve, the harvest will resume its pace and we will see an increase in sales.”
As a piece of information in favor, F2 points out that “the sharp drop in high-frequency inflation measurements works in favor and we will have to see the outcome of the treatment of the Bases Law and the fiscal package, two key strategic tools to achieve success in anchoring long-term expectations.”
The consulting firm EconViews sees that “the Government has many objectives. On the one hand, pure “Mileism” always looks at the amount of money as a key variable and the lower rate will mean less interest issuance in the Central Bank and an acceleration in the process of cleaning up its balance sheet. As the rate is negative in real terms, remunerated liabilities fall as a percentage of GDP.”
“The lowering of rates is compatible with a trap that will have more life than we thought a few months ago” (Econviews)
The report indicates that banks now “have to start taking risk and lending again. Many entities have already started. And two of them launched mortgage loans. This will not be as powerful a lever as to reactivate the economy, but it can certainly help. Loans to the private sector in Argentina are just over 4% of GDP. The only country in Latin America that has less credit penetration is Haiti. The numbers speak for themselves.”
Regarding the reduction in rates, EconViews believes that “it is compatible with a trap that will have more life than we thought a few months ago. Although we do not rule out that the Government goes for an additional reduction in rates, our base scenario is that they remain at 60% until Pandora’s Box is opened, that is, exchange restrictions are eliminated. In our criterion to open the stocks, a positive real rate (that is, greater than inflation) and a competitive exchange rate will be needed if we want to avoid shocks. And, Logically, the idea is that the opening of the stocks is a good thing. For that reason we see the rate at 60%, which if inflation goes down it will be less and less negative, and then a jump to 80% to be able to open the stocks probably in the last quarter of the year.”
JP Morgan, the largest bank in the United States gave its vision. “Disinflation should help stabilize and improve purchasing power. But we believe that the fuel for sustainable growth must come from a credibility shock.”
Later he indicates that this is conditional “on the approval of the bills that would raise close to 1% of GDP in additional income.
This shock could be related to the web of capital controls which, together with regulation and legal changes, some of which are already in place, should help drive a recovery in private sector investment from current lows. Thus, we maintain the forecast for GDP decline for all of 2024 at -3.6% with a drop of 1.2% in the last quarter.”
With this overview given by the consultants, it can be seen that the BOPREAL, a bond issued by the Central Bank to pay importers, can be one of the attractive investments. Next week there will be a series 3 tender with the novelty that companies that have to pay royalties or dividends abroad will be able to participate. The market sees this measure as a move closer to leaving the stocks. But the most important thing is that from today everyone will be watching the treatment of the basic law and the fiscal package in deputies.
