This Wednesday, the Ministry of Economy carried out the second and last tender of the first half of the year and obtained 8.4 billion pesos of the market with a menu of bonuses that was made up of Treasure letterswhich had an improvement in the interest rate in their version maturing in December, and a currency hedged bondwhich was less in demand.
As the maturities in pesos added up 5.7 billion pesos in the last part of the month, a mass of leftover pesos (2.7 billion pesos) will be used by the Treasury to buy dollars it needs for pay maturities of securities in foreign currency throughout July, the Ministry of Finance reported.
Two of the Lecaps that made up the Palacio de Hacienda offer were declared void (those with an end date of July 26 and August 30). The bill as of September already had a reference rate of 4.25% monthly plan planned in advance and which had an allocation ceiling of 6 billion pesos. Then, another Lecap to December for another 2.2 billion was “cut” with a 4.5% monthly. Finally, a bonus dollar linked which had only $200,000 million placed.
The acceleration of alternative exchange rates and a wider gap with the official rate, in the framework of a month like June that is discounted will show a somewhat higher inflation rate than the 4.2% of May, already made the market think that the Government could improve the interest rate with which it remunerates investments in pesos.
In the latest operations it began to replace remunerated liabilities of the Central Bank with Capitalizable Letterswith a more attractive rate than the one offered by the BCRA, which remained at 40% nominal annually after having threaded a string of cuts until a pronounced reaction in the exchange market interrupted that process.
“The striking thing about this opportunity was that, once again, they once again left the short alternatives with expiration on July 26 (S26L4) and August 30 (S30G4) of this year deserted. Therefore, Investors who wanted to receive a higher rate, in this menu had to marginally stretch the duration. In line with this, it was agreed that what was tendered in S30S4 would have a minimum TEM of 4.25%, a rate that seemed superior to the short-term alternatives,” said Portfolio Personal Inversiones.
“For market players who preferred to stretch the market even further, duration With the LECAP as of December (S13D4) a significant premium was offered by cutting it by 4.5%, remaining above market rates. In the run-up to the tender, we projected a rate of 4.25% for this section. Finally, the Linked Dollar (TZVD5) which we estimated could come out in a range of DL -3%/-3.5% (in line with the curve) cut with a rate of -8.79%, remaining significantly negative in comparison. with their peers,” he concluded.
For its part, Delphos mentioned that “with this tender, the Treasury seems to have the intention again to extend the duration of maturities,” they mentioned, something that ended up being confirmed with the result of the operation.
A recurring question in the market is whether the Lecap rate is effective in becoming the reference for investments in pesos. “Although the Government has defined minimum rates for some series of Lecap in the last 3 tenders, on all those occasions there were emission caps, which means that, at least until now, these minimum rates were not freely accessible,” consultant 1816 raised as an objection.
“If the Government wants the rate to become 4.20% or 4.25% TEM, the logical thing would be for it to carry out open market operations between tenders, so that the rate of the primary Lecap market remains in the secondary , something that has not been happening,” they said.
“In order for this task to be carried out by the BCRA (as happens in most countries), the Central Bank should have Lecap in its portfolio, which is complex because the BCRA is prohibited by Organic Charter from participating in auctions” from the Ministry of Economy, they said.
“But it does not seem like a limitation that is impossible to overcome: the Treasury could repeatedly offer swaps to the BCRA to exchange certain securities for Lecap. on the runso that the Central can influence the secondary market as a buyer, but also as a seller,” they concluded.
The issue of positive interest rate against inflation is critical for the next steps of economic policy. Caputo announced a few weeks ago that the stage of negative and blending rates ended and would give way to another with pesos remunerated against the rise in prices and hours later the International Monetary Fund mentioned it as one of the pillars on which the economic team should rely in hereafter.
The IMF decided not to give in in the last quarterly review of goals when analyzing what the next steps of economic policy should be and adjusted to its traditional manual, which indicates that the interest rate must be positive. It is about encouraging savings in local currency and preventing savers from choosing to dollarize. “The real policy rate should become positive to support the demand for pesos and disinflation,” the IMF deputy director expressly said. Gita Gopinath.
“The BCRA will continue to conduct monetary policy in a flexible, prudent and pragmatic manner. Based on the progress achieved in the recovery of monetary policy tools and the control of money creation factors, the Agreement has provided for the presentation to the IMF of a monetary programming framework at the end of June 2024″said the monetary authority in that joint message. The interest rate from now on and how it is transmitted to the rest of the savers will be one of the issues in question.
