Debt repurchase operations are common all over the world, in the context of what is understood as “liability management. When these types of transactions are made, the normal thing is that whoever announces it is comfortable liquidity and seize the opportunity. This is by far not the case in Argentina, which it literally was for quite some time scratch the bottom of the pot to obtain foreign currency. Let the importers say so, who have to queue and wait 180 days to be sold foreign currency at the official price.
The official argument was that improve the “dollar curve”. Translation: to bring down the -now stratospheric- rates that yield debt securities in dollars, those securities that were issued during the Guzman administration, in an exchange considered “the most successful in history” by the former Economy Minister himself.
The market prices of the securities speak clearly of the (dis)confidence that this Government generates in the markets to which it now intends to return. The idea is that if the curve goes down, access to markets would be something a little closer to the possibilities of this government. It won’t be like this. Not during the rest of Alberto Fernández’s term.
All day yesterday there was talk of something officials took it upon themselves to deny. The information has leaked that allowed the most informed to make huge profits by buying the bonds eligible for repurchase before the announcement?
The question is when information may have been leaked. Bond prices started to rise in November 2022, in line with a general improvement in the markets. Not only Argentine bonds, which were at auction prices, rose, but others such as those of Ecuador, without going any further.
The AL29 was at $19 on Oct. 17 and closed at $35 yesterday (+84%). The GD30 had a similar ride. From $20 to $36.
What caught the eye is this the volume traded by these two bonds between Monday and Tuesday it was surprisingly higher than the daily average of the last few weeks. Specifically, the GD30, whose trading volume, in pesos, jumped from $70 million on Friday to $161 million on Tuesday.
“Normalizing the debt curve sounds like an excuse” said an operator who, however, welcomed the announcement. “The timing of the announcement is critical, because fuels a continuous increase and a feeling of recovery of Argentine assets”.
Another operator, with a very long career, was much more critical: “The purpose is not well understood. Because there aren’t enough reserves, we won’t have foreign financing no matter how much they buy back at these prices and financially the big problem is for the investors. Because the market got tired of buying these same bonds from the BCRA at prices ranging from $20 to $25 and now the Treasury gives them an outlet by paying them above $35. The reality is that they are formalizing dollar cash sales to narrow the gap.
Regardless of the criticisms, what is clear is that the market is taking advantage of the opportunities presented to it. Those who received these bonds in the exchange were forced to endure a brutal decline. Those who went downstairs made millions.
The last question is what a use will have this announcement to improve Argentina’s financial position.
Source: Clarin
