Last week the Central Bank defined a new reduction of the interest rate from 60 to 50%, to continue with the elimination of the quasi-fiscal deficit. Its about third cut in less than a monthwhich accentuates the negative difference with respect to inflation.
This riskier trend also entails its Negative effectsas the reduction in returns on fixed terms or a greater disincentive to agriculture to liquidate the thick harvest. The latter is a key point for Luis Caputo, Santiago Bausili and his entire economic team support the recomposition of the BCRA’s reserves.
Faced with this scenario, the financial specialist Salvador Di Stefano shared this Monday a new analysis in which it reviews the latest BCRA rate reduction and highlights the investments that you consider most promising: what did he say.
The Blue Guru’s analysis after the new rate cut: what he recommends
The reduction of the fixed term rate, explains Say Stefano, at the moment “invites investors to look for new options” that yield more than the 4.2% monthly of the classic financial instrument, a rate well below inflation.
Given this, the head of the consulting firm SDS has “its sights” on bonds and stocksoptions pulled by a “more relaxed financial system and less pending any macroeconomic news that complicates the economic scenario” after the arrival of Javier Milei to power.
Despite the strong recession, the decline in Argentina’s productive competitiveness at a global level and the lower liquidation of dollars from the agricultural sector in contrast to what was expected, markets also “see the glass half full” as Di Stfano believes.
“In the last few wheels the market began to discount that The Government will be successful in its anti-inflationary policy“says the analyst. With inflation projections around 8% for April and 5.5% for May, the downward path of the CPI would effectively be consolidated.
However, Di Stfano recalls that these numbers would be helped by the postponement of rate increases for the month of July. For the specialist, these extensions show that “the economic team wants to reach an agreement with the IMF in the month of June with wordier numbers“. To which he warned: “After the agreement, there could be touch-ups“.
Regarding the economic decline caused by the intense reduction in purchasing power in recent months, Di Stfano noted that “the majority of the market does not see growth drivers” for a “V”-shaped rebound in the economy, unlike the scenario with which Milei is excited.
“Everything would indicate that low activity is here to stay, at least for the year 2024,” believes Di Stefano. Despite this, he points out that “the capital market continues to discount a resounding success of the economic plan“.
And illustrates: “Sovereign bonds as AL30 They are listed at US$58.50 and have a return rate of 21% annually. In order for us to lower the risk beyond 1,000 points, these titles should be around US$70 and their return rate would be in the range. 13.5% annually. Cheer up, we can still do it.”
In addition, he added as an example the good returns of bank shares, which “they have begun to show exceptional increases”two samples “of the great expectation that the market has regarding a quick exit from the stocks, lower inflation and more financing to the market.”
“For now, no one is talking about possible defaults in the system, despite an economic recession scenario. Everyone sees the glass half full“warned the “Gur of the City.”
In this scenario, “the bonds in pesos adjusted by CER have modified their curve, the fixed-term interest rate has dropped to 40% monthly, and the expectation that 12-month inflation could be around 59.0% annually will leave the fixed term rate with a negative rate of 7.0%“.
This is why CER bonds “have rearranged their performance and in many cases have begun to show positive rates”, with greater competitiveness with respect to UVA fixed terms.
“It would give the impression that the market has an additional price rally ahead, either in sovereign bonds in dollars, as well as bonds in pesos adjusted by CER,” analyzes Di Stfano.
And he closes: “The fixed-term rate is no longer attractive, however, for now there is no massive migration of money from banks towards other fixed or variable income instruments. Stocks should see a lot of benefit, since the largest “The enemy of variable income is the interest rate, and the government deliberately took it to extremely low levels, so low that many companies finance themselves in the market so as not to sell their stocks at low prices.”
