In a new day of exchange tensions due to the rise of the blue dollar and the loss of reserves, The Government raffled off another debt tender in pesos this Wednesday and placed $8.4 billion. That way, covered the maturities of the week and obtained a surplus of $2.7 trillion to pay the maturity of sovereign bonds in dollars that expires in the coming weeks.
The Ministry of Finance announced that the offers totaled an effective value of $15.1 billion, a part of which was left out. In the auction, four capitalized bills in pesos (Lecap) with maturities in July, August, September and December of this year were offered, and it was reopened a bond adjusted to the dollar with a term until December 2025.
As the two shortest bills were declared void, the shortest placement was for 91 days (September), being the one that aroused the most appetite among investors by capturing 70% of the placement. While the rest of the financing obtained corresponded to the December Lecap and, to a lesser extent, the linked dollar bond.
The September bill was cut at a monthly effective rate (TEM) of 4.25%, in line with the minimum rate announced in the tender, while the new bill maturing in December – and with a lower placement amount – was cut at a rate of 4.5%, somewhat above what the comparable section yielded at yesterday’s close, according to Juan Manuel Franco, chief economist of the SBS group.
“The rate of 4.5% was above the comparable rates at yesterday’s close in terms of duration. As it is a new letter, it would not be correct to say that “the rate rose.” And although it is above the minimum TEM of the prior tender and the TEM of the September letter, since it is longer it is normal that there will be some premium in terms of TEM,” Franco explained.
The Ministry of Economy has been raising Treasury rates to accelerate the transfer of Central Bank debt (1-day repos) to Treasury bonds. In this context, PPI analyst Pedro Siaba Serrate highlighted that “for market players who preferred to extend the average life of the LECAP even further through December (S13D4), a significant premium was offered by cutting it at 4.5%, remaining above market rates.”
Finance explained that “the proceeds of this tender, above the maturities of $5.7 billion, will be used to purchase the dollars necessary to pay the next debt maturities in foreign currency during the month of July.” On July 9, US$2.55 billion matures, of which US$2.13 billion is in private hands, according to EcoGo.
The challenge facing the government is that debt migration increases the need to sustain fiscal adjustment to maintain debt refinancing in pesos or eventually pay holders of Treasury securities. Since there is no external credit, the Government has been paying the external debt in dollars with internal debt and the fiscal surplus.
